Translation Notice — This is an English translation of a Hebrew law and may contain inaccuracies. In any dispute or legal matter, the original Hebrew text as published in Reshumot (ספר החוקים) is the sole authoritative and legally binding version.

Ordinance

Income Tax Ordinance

פקודת מס הכנסה

Division C: Miscellaneous Provisions

Definitions

211.

In this Division —

"double taxation relief" means any credit in respect of income tax abroad that was allowed for the purposes of income tax under this Ordinance, by virtue of an agreement under Section 196, and any relief under Section 214, including any credit or relief taken into account in determining the net Israeli rate imposed on dividends received;

"relief rate" means the rate which is the excess of the rate of tax deducted from the dividend over the net Israeli rate.

[Set-off and refund]

Effect of Relief on Set-Off and Refund

212.

Where the tax payable by a company is affected by double taxation relief, the amount to be set off under Section 163 or to be refunded under Section 160, in respect of the tax which the company deducted from a dividend it paid, shall be reduced — in accordance with the following rules — and these are the rules:

(1)If the recipient of the dividend is not liable to tax thereon, the reduction shall be in an amount equal to the tax on the underlying dividend computed at the applicable relief rate;

(2)If the rate of tax applicable to the recipient in respect of the dividend is less than the relief rate applicable thereto, the reduction shall be in an amount equal to the tax on the underlying dividend computed at a rate equal to the difference between the two rates.

163 Book of Laws 6 9 Iyyar 5721 25.04.1961

Place of Dividend in the Income Scale

213.

For the purposes of Section 212 —

(1)Where the income includes a single dividend as referred to in Section 212, it shall be treated as the highest rung in the income scale;

(2)Where the income includes several such dividends, each dividend whose net Israeli rate is lower than that of another shall be treated as a higher rung than the other in the income scale;

(3)Where the tax on a dividend is imposed at different rates on different parts thereof, or where the tax is imposed on one part of the dividend and not on another part, each different part shall be treated as a separate dividend.

[Dividend in the income scale]

Double Taxation Relief on Foreign Income of a Resident

214.

(a)The Minister of Finance may grant double taxation relief in respect of income of a resident of Israel derived from abroad on which income tax or a tax similar in character thereto has been imposed at source, by exempting the income from payment of all or part of the tax, as shall be specified in the Order.

(b)The provisions of this Section do not derogate from the powers under Section 196.

[Double taxation relief on foreign income of a resident]

Part XI: Penal Provisions — Offences for Which No Other Explicit Penalty Is Prescribed

215.

A person who contravenes this Ordinance or any Regulations made thereunder, for which contravention no other explicit penalty has been prescribed, is liable to Imprisonment of three months or a Fine of 1,000 pounds, or both penalties together.

[For which an explicit penalty is prescribed]

Offences — Failure to Comply with Certain Requirements

216.

A person who, without sufficient cause, commits one of the offences listed below, is liable to Imprisonment of six months or a Fine of 2,000 pounds, or both penalties together, and these are the offences:

(1)Failed to comply with a requirement contained in a notice given to him under this Ordinance;

(2)Failed to appear as required by a notice under this Ordinance, or appeared but did not answer a question lawfully put to him;

(3)Refused to accept a notice sent to him under this Ordinance;

(4)Failed to submit on time a return under Sections 132 or 133;

(5)Failed to maintain account books in accordance with the instructions of the Commissioner given under Section 130(a);

(6)Destroyed or concealed documents that are of value for the purposes of assessment.

[Specific offences etc.]

Incorrect Returns and Particulars

217.

A person who, without reasonable justification, made an incorrect return by omitting any income in respect of which he is required under the Ordinance to submit a return, or by understating it, or a person who furnished incorrect information concerning any matter or thing affecting his tax liability or the tax liability of another person or of a Partnership, is liable to Imprisonment of one year or a Fine of 3,000 pounds and the amount of the deficiency in the income as determined on account of those incorrect returns or information, or as would have been determined had the returns or information been accepted as correct, or both penalties together.

[Incorrect]

Failure to Deduct Tax

218.

A person who failed to deduct tax which he was required to deduct under Sections 161 or 164, and also a person who received employment income or income under Section 2(5) knowing that tax had not been deducted therefrom under those sections, is liable to Imprisonment of six months or a Fine of 1,000 pounds and twice the total of all amounts not deducted, or both penalties together.

164 Book of Laws 6 9 Iyyar 5721 25.04.1961

[Failure to remit tax collected]

Failure to Remit Deducted Tax — Fraud etc.

219.

A person who deducted tax under Sections 161 or 164 and, without reasonable justification, did not pay it to the Assessing Officer as provided in those sections, is liable to Imprisonment of one year or a Fine of 3,000 pounds and twice the total of the said deductions, or both penalties together.

Fraud etc.

220. A person who wilfully, with intent to evade tax or to assist another person to evade tax, commits one of the offences listed below, is liable to Imprisonment of four years or a Fine of 10,000 pounds and one and a half times the amount of the income he concealed or intended to conceal, or both penalties together; and these are the offences:

(1)Omitted from a return made under the Ordinance any income which should have been included in the return;

(2)Made in a return under the Ordinance a false statement or entry;

(3)Gave a false answer, orally or in writing, to a question put to him or to a demand for information addressed to him under the Ordinance;

(4)Prepared or maintained, or permitted a person to prepare or maintain, false account books or other false records, or forged or permitted the forgery of account books or records;

(5)Used or permitted the use of any fraud, artifice, or contrivance.

Monetary Composition

221.

A person who has committed an offence under Sections 215–220 may, with the consent of that person, have a monetary composition taken from him by the Commissioner not exceeding the highest Fine that may be imposed for that offence, and if this is done, all proceedings against him in respect of that offence shall be discontinued, and if he was detained therefor, he shall be released.

Burden of Proof

222.

(a)A person charged with an offense under Section 216(4) bears the burden of proof that he is not obligated to submit a return.

(b)A person charged with an offense under Section 216(6) bears the burden of proof that the documents he destroyed or concealed are of no value for the purpose of the assessment.

(c)A person upon whom the provisions of Sections 161 and 164 apply and who is charged with an offense under Sections 218 or 219 bears the burden of proof that he has complied with the said provisions.

223. A person charged with an offense for omitting income or for recording it in a return pursuant to Section 217 shall be deemed prima facie proven guilty of the offense if any one of the following is established:

(1)Household expenses or private expenses incurred during the tax year exceeded the income in respect of which he submitted a return to the Assessing Officer;

(2)His assets, or the assets of his wife or of his children under the age of 26, increased by an amount exceeding the amount of income in respect of which he submitted a return to the Assessing Officer.

[For the preparation of a return]

Liability of an Accessory

224.

A person who assisted another in preparing a return, notice, or other document for the purposes of this Ordinance, knowing that such return, notice, or document contains incorrect information, or a person who appeared as the representative of a taxpayer and furnished information for the purposes of this Ordinance knowing it to be incorrect, shall be regarded, for the purposes of Sections 215–217 and 220, as though he himself did the said acts.

Limitation Period

225.

No criminal prosecution shall be instituted under this Ordinance after six years from the tax year in which the offense was committed, and in the case of an offense against the provisions of Section 220 — after ten years from the tax year in which the offense was committed.

165 Book of Laws 6 9th of Iyar 5721 25.04.1961

Proceedings Do Not Exempt from Payment of Tax

226.

The institution of proceedings for the imposition of punishment, a Fine, or Imprisonment under the Ordinance, or the imposition thereof thereunder, shall not exempt a person from the obligation to pay tax to which he is or may become liable.

[Do not exempt from payment of tax]

Proceedings for Punishment

227.

The Minister of Police may authorize an Assessing Officer to conduct investigations in connection with offenses under this Ordinance; an Assessing Officer so authorized shall have all the powers vested in a police officer of the rank of Inspector and above under the Criminal Procedure Ordinance (Evidence)22, and the provisions of that Ordinance shall apply to such an investigation, with such modifications as the matter requires.

Investigations

228.

The provisions of this Ordinance shall not affect any criminal proceeding under any other law.

[Other laws preserved]

Part XII: General Provisions

229.

For the proper execution of the Ordinance, the Minister of Finance may appoint a Commissioner, Assessing Officers, and other officers or other persons, all as required.

[Executive]

Appointment of Authority

230.

The powers of the Assessing Officer shall also be vested in the Commissioner.

Powers of the Commissioner

231.

A person who holds an official position in the execution of the Ordinance, or who is employed in its execution, is obligated to regard every document, information, return, assessment list, or copy thereof, which relates to a person's income or to a particular of his income, as a matter of secrecy and personal trust, and to treat them accordingly.

Duty of Confidentiality

232.

A person appointed under the provisions of the Ordinance, or a person employed in its execution, shall not be required to produce to a court any return, document, or assessment, or to disclose to the court or to notify it of any matter that came to his knowledge in the course of performing his duties under the Ordinance, except to the extent necessary to do so for the application of the provisions of the Ordinance, or with the intention of prosecuting an offense committed in respect of income tax, or in the course of hearing such a prosecution.

[Shall not be required to disclose a secret]

Income Tax Employee

233.

(a)The Minister of Finance may publish, in the manner and place he shall determine, a list of all taxpayers, specifying the amount of the chargeable income of each of them for a particular tax year, as reported in the return submitted by the taxpayer, or as determined by the Assessing Officer or by the court, as the case may be. If a change occurs in the said list — as a result of objections or Appeals submitted by the taxpayer — the list shall be amended, upon the taxpayer's request, accordingly; any person may, at the times and places determined, inspect the list published as aforesaid and also obtain, in exchange for a prescribed fee, a certified copy of the list, in whole or in part.

(b)Notwithstanding the provisions of subsection (a), the Minister of Finance may, with the approval of the Finance Committee of the Knesset, refrain from including a certain category of taxpayers in the list of taxpayers to be published as aforesaid.

[Taxpayers]

Publication of List

234.

A person who is in possession of or has control over documents, information, returns, assessment lists, or copies thereof relating to a person's income or to a particular of his income, and who at any time disclosed or attempted to disclose such information, or any part of the contents of such documents, to a person whom the Minister of Finance has not authorized to receive it, or who disclosed them otherwise than for the purposes of this Ordinance, shall be liable to Imprisonment of six months, or a Fine of one hundred pounds.

[Income secret]

Penalty for Disclosure

235.

(a)A provision of law requiring the disclosure of information concerning the property or income of another person shall not apply to a person who holds an official position in the execution of the Ordinance or who is employed in its execution, unless expressly stated otherwise in this Ordinance.

[Disclosure of information]

22 Laws of Palestine, Vol. I, Chapter XXXIV, p. 439.

166 Book of Laws 6 9th of Iyar 5721 25.04.1961

(b)Notwithstanding the provisions of this Section, it shall be permitted to disclose to the National Insurance Institute under the National Insurance Law, 5714-1953, the amount of a taxpayer's income as reported in the return submitted by him, or as determined by the Assessing Officer or by the court.

[Representative]

Prohibition on Appearance of Representative

236.

(a)A taxpayer shall not be represented by a Company.

(b)The Commissioner may issue instructions prohibiting, for a period he shall determine, a person from appearing as a representative of a taxpayer, if that person is not fit, in the opinion of the Commissioner, to serve as a representative, or if that person has behaved in an unfair manner in any matter relating to this Ordinance, provided that instructions under this subsection shall not be given before that person has been given an opportunity to state his case before the Commissioner; however, a person whose appearance has been prohibited as aforesaid may appeal, within 30 days from the date of the giving of the instructions, before a committee appointed by the Minister of Finance by notice published in the Official Gazette.

(c)The Commissioner shall not prohibit the appearance of an advocate, of a certified public accountant within the meaning of the Certified Public Accountants Law, 5715-1955 23, or of a person qualified to audit the books of a cooperative society pursuant to Section 20 of the Cooperative Societies Ordinance 24.

[Notices]

Signature on Notices

237.

(a)Every notice that the Assessing Officer is required to give under this Ordinance shall be signed by him or by a person or persons he has appointed for that purpose, and every notice upon which such a signature is duly printed or written is a valid notice, except that any written notice under this Ordinance by which a person is required to furnish particulars to the Assessing Officer, or a notice under this Ordinance requiring the attendance of a person or of a witness before the Assessing Officer, shall be signed by the Assessing Officer himself or by a person duly authorized by him.

(b)A signature on a notice purporting to be the signature of a person appointed for that purpose shall be deemed to be his signature unless the contrary is proved.

Service of Notices

238.

(a)A notice may be served on a person either personally or by registered post to his business address or private address as last known; if sent by registered post, it shall be deemed to have been served on the sixth day after the day of dispatch, if sent to persons in Israel, or on the day after the day on which the notice would have arrived by ordinary post, if sent to persons outside Israel, and proof of service in this manner shall be sufficient if it is proved that the letter containing the notice was duly sent and duly addressed.

(b)A notice sent as provided in subsection (a) which the addressee refused to accept shall be deemed to have been duly served.

[Post]

Exemption from Postage Stamps

239.

All returns, additional information and letters consequential thereto, and tax payments under the provisions of this Ordinance may be sent to the Assessing Officer free of postage in envelopes marked "Income Tax".

Rounding of Amounts

240.

(a)In calculating the amount of chargeable income, every amount shall be rounded up or down to the nearest whole pound.

(b)In calculating the amount of tax assessed to a taxpayer under the Ordinance, every amount shall be rounded up or down to the nearest half-pound.

Designation of Tax Year

241.

A tax year shall be designated by the number of the calendar year in which the tax year commences.

24 Laws of Palestine, Vol. I, Chapter LXIV, p. 336.

167 Book of Laws 6 9th of Iyar 5721 25.04.1961

Effect of Trading with the Enemy Laws or with Absentees

242.

Where the Trading with the Enemy Ordinance, 1939 25, or the Absentees' Property Law, 5710-1950 26, or any other law dealing with trading with the enemy or with absentees, affects a person, income, or property, the provisions set out in the Schedule shall apply.

[Effect of laws on trading with the enemy or with absentees]

24:5. The Minister of Finance may make Regulations for the implementation of the provisions of this Ordinance, and in particular, Regulations concerning —

(1)Forms of returns, claims, declarations, and notices under this Ordinance;

(2)The deduction and payment at source of tax on emoluments and pensions paid from the State Treasury, on income from employment, or on income under Section 2(5);

(3)Any matter which the Ordinance empowers to be prescribed.

[Regulations]

Authority to Promulgate

244.

The Minister of Finance may, by Order requiring approval of the Knesset by way of resolution, amend the rates of deductions and credits specified in this Ordinance.

Authority to Amend Deductions and Credits

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