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Israel – Tax Authorities issue Draft Circular regarding activities of foreign companies through the Internet

The Israeli Tax Authorities (ITA) issued draft guidelines titled “Activities of Foreign Companies through the Internet” (hereafter the “Draft Circular”) for comments.

The purpose of the Draft Circular is twofold:

  1. To elaborate on when service income is generated by a foreign entity; in cases where the internet serves as a key tool for generating such service income, income would be regarded as generated by a permanent establishment (PE) of such an entity in Israel.
  2. To determine, if, and under what circumstances, a foreign entity, which provides services to Israeli customers through the internet, should register for Israeli VAT purposes.

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