12° Nicosia,
14 June, 2024

Israeli tax authorities probe Israeli investor activities in Cyprus

Investigation launched into tax status of Israeli investors operating in Cyprus


Israeli tax authorities are investigating the extensive business activities of Israeli investors in Cyprus, as revealed by Shay Aharonovich, head of Israel's Tax Department, in a report by leading financial newspaper, Globes.

The focus of the investigation revolves around whether Israeli investors should be classified as "permanent residents abroad" or if they manage their business affairs in Cyprus from their permanent tax residence in Israel, as per Israeli legislation.

Authorities are monitoring the frequency of airline tickets between Israel and Cyprus issued to certain investors and entrepreneurs in sectors like high-tech and real estate.

The interest of Israeli tax authorities is compounded by Cyprus' significantly lower corporate income tax rate, reaching up to 12.5%, compared to Israel's tax scale, which can peak at 50% of taxable income.

With an estimated 10 to 20 thousand Israeli taxpayers residing in Cyprus, authorities seek to determine how many maintain their permanent residence in Israel while conducting business activities on the island, potentially evading tax obligations.

A legislative framework for control is lacking, hindering the detailed audit sought by Israeli tax authorities.

Authorities are also evaluating whether property transactions by Israeli taxpayers in Cyprus should be considered taxable business activities, even if not conducted professionally.

If Israeli investors are found to maintain Israel as their primary residence and source of livelihood, they could face taxation at Israel's maximum tax rates.

Notices have already been issued to Israeli businessmen operating in Cyprus, as reported by Globes.

[With information from CNA]

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