Minimum Corporate Tax in a Multinational Group Law, 5786-2025

The purpose of this Law is to ensure the payment of minimum tax in Israel by a multinational group in Israel, in accordance with the principles for the prevention of Base Erosion and Profit Shifting (BEPS), as established by the Organisation for Economic Co-operation and Development (OECD) (in this Law – the OECD).

In this Law –

"Substance-based Income Exclusion" (SBIE), "Ultimate Parent Entity", "Constituent Entity" (CE), "Permanent Establishment" (PE), "Joint Venture" (JV), "MNE Group", "Effective Tax Rate", "International Financial Reporting Standards" (IFRS) and "Acceptable Financial Accounting Standard" – as defined in section 10 of the Rules;

"consolidated financial statements" – Consolidated Financial Statements as defined in section 10 of the Rules;

"GloBE Income" – GloBE Income or Loss as defined in section 10 of the Rules;

"linkage differentials and interest", "Director" and "Assessing Officer" – as defined in the Ordinance;

"Israeli Constituent Entity" – a Constituent Entity or Joint Venture whose location in Israel is determined in accordance with section 10.3 of the Rules;

"United States generally accepted accounting principles" – the accounting principles as shall be accepted from time to time in the United States in relation to companies listed on stock exchanges in the United States, including principles and standards published by the Financial Accounting Standards Board (FASB) and principles adopted by it;

"the Rules" – the Global Anti-Base Erosion Model Rules, contained in the document approved by the OECD, a translation of which is set out in the Schedule, including any update thereof approved by the OECD and determined by the Minister by Order pursuant to section 23;

"domestic top-up tax" – a tax imposed pursuant to section 3(a) or (b), as the case may be;

"Top-up Tax", in respect of a multinational group in Israel – the amount of tax calculated in accordance with section 5 of the Rules, including sections 6, 7, 9.1 and 9.2 of the Rules in respect of a multinational group in Israel, provided that in calculating the tax as aforesaid the domestic top-up tax imposed pursuant to this Law shall not be taken into account;

"Material Competitive Distortion" – a Material Competitive Distortion as defined in section 10 of the Rules, as adjusted for domestic top-up tax reporting;

"the Ordinance" – the Income Tax Ordinance [New Version];

"multinational group in Israel" – all the Israeli Constituent Entities that are part of the same multinational group;

"minimum tax rate" – 15%;

"tax year" – as defined in the Ordinance, and if the Director has determined a special reporting period pursuant to section 21 – the period so determined;

"Israeli financial reporting standards" – Israeli financial reporting standards published or adopted by the Israeli Accounting Standards Board.

An objection and appeal against the assessment notice pursuant to section 5(d) may be submitted pursuant to the provisions of Chapter II in Part 9 of the Ordinance.