Cap Phantom

Israel decided to encourage foreign investors and from the beginning of the year a number of changes were made in the Income Tax Ordinance for the benefit of foreign residents. Amongst the main benefits one can find: a tax exemption on dividends that a company receives from foreign companies in which it invested and an exemption from capital gains tax from the sale of shares in those companies. In this way, the company may move revenues from abroad to Israel without any tax liability. A foreign resident shareholder would pay on dividends that he receives from the Israeli holding company a reduced tax of only 5%. Regarding capital gains from the sale of the company’s shares, he will be entitled to a full tax exemption.

An international investment company (holding company) will be tax exempt from dividends that it receives from investee companies. As mentioned, the benefits are not intended for Israeli residents and the main aim of the arrangement is to attract foreign residents to invest in Israel. Nevertheless, the new arrangement will not prevent Israeli residents from establishing holding companies. Israeli residents will be liable for tax, on their proportional share in the profits of the holding company (including exemptions), as if they received an imputed dividend (the tax rate on the imputed dividend will be determined according to the specific characteristics of the shareholder: if he is an individual controlling shareholder – 25%; and if he is an individual who is not a controlling shareholder – 20%). Israeli residents do not have any advantage to establish such a company because the Tax Authority will carry out a comprehensive examination to ensure that Israeli residents are not behind the founders of the company who are foreign residents (either an individual or a company).

What are the conditions that an Israeli holding company will be required to meet?

The company was incorporated and managed from Israel. For a period of at least 300 days during the tax year (from the year after the year of incorporation), the following conditions existed:

1. An investment of a minimum amount of NIS 50 million in shares and loans in foreign investee companies whose main income is business income produced abroad. The cost of the shares and the balance of the loans in investee companies comprise at least 75% of its total assets.

2. The Israeli holding company will have a minimum holding (10%) during a period of at least 12 months.

3. The company will not have income from business, excluding income from services or the management of investee companies.

4. An important technical detail – the company must submit an application to the assessing officer, to be considered “an Israeli holding company”, within 90 days from the date of its establishment.

Which investments abroad will entitle Israeli investment companies to benefit?

1. 75% and more of the income whose source is from business operations.

2. The investee company is a resident of the country with which there is a tax treaty with Israel; alternatively, that the tax rate on business profits by the company in that country is 15% or more. The object of this qualification is to prevent a tax regime which encourages tax haven activities. For example, Cyprus has a company tax rate of 10% up to a taxable amount equal in value to $1,200,000, and over this amount an additional 5% is paid. An investee company must submit tax returns in the country where it operates.

3. The cost of foreign company assets in Israel does not exceed 20% of all its assets in every tax year. In addition, the investee company’s income in Israel does not exceed 20% of its total income in the tax year.

A new immigrant will be entitled to tax benefits, which are given to each new immigrant, due on income from dividends or capital gains that the holding companies had and which will be considered as an imputed dividend. In addition, on the dividend that he actually receives from a holding company during the first five years after his immigration, he will be liable to tax at a rate of 5% as if he was a foreign resident.

Proposal for the structure of offshore-type of company

A foreign resident or even a Cypriot company establishes in Israel a holding company which purchases shares of companies operating in countries of the former Soviet Union and is engaged in managing an active business. The company pays the local company tax (e.g.: in Russia 24%).

An Israeli holding company receives its dividends less tax paid in Russia – a maximum of 10% (compared to an Israeli resident company which complements the tax on the dividend received from abroad to 25%).

Globes – Financial Consumer Supplement, April 3, 2006. ___________________

For additional details regarding the specific requirements of every client, send us your query and we will gladly get back to you with a response regarding your specific needs.

They haven’t done it yet. But some things are just inevitable and I sense that the odds of Israel attacking Iran’s nuclear plants is about a 9.9 on a scale of 10.0! Iran wants to wipe Israel off the face of the earth and the only thing that keeps that from happening is a nuclear capability. So, while the rest of world twiddles its collective thumbs, Israel is preparing- to save their nation.

And Isreal is no longer waiting for America’s blessings either.

While its preference is to coordinate with the US, defense officials have said Israel is preparing a wide range of options for such an operation. “It is always better to coordinate,” one top Defense Ministry official explained last week. “But we are also preparing options that do not include coordination.” Israeli officials have said it would be difficult, but not impossible, to launch a strike against Iran without receiving codes from the US Air Force, which controls Iraqi airspace. Israel also asked for the codes in 1991 during the First Gulf War, but the US refused.

History hs shown, the last war notwithstanding, that Israel can take care of its own!

In September, a Defense News article on an early warning radar system the US recently sent to Israel quoted a US government source who said the X-band deployment and other bilateral alliance-bolstering activities send parallel messages: “First, we want to put Iran on notice that we’re bolstering our capabilities throughout the region, and especially in Israel. But just as important, we’re telling the Israelis, ‘Calm down, behave. We’re doing all we can to stand by your side and strengthen defenses, because at this time, we don’t want you rushing into the military option.’”

Easy for us to say as we sit outside the distance of their long range missles.

The IAF was preparing for a wide range of options, OC Air Force Maj.-Gen. Ido Nehushtan recently said, adding that all it would take to launch an operation was a decision by the political echelon. “The air force is a very robust and flexible force,” he told Der Spiegel. “We are ready to do whatever is demanded of us.”  That they will- one day!

Over the past year the commercial real estate market has begun to reawaken and the significant number of transactions leave one with the feeling that reference is not to a momentary phenomenon but rather to a real change in trend, which heralds the coming of a new period in the window of opportunities for executing transactions at attractive prices and with handsome returns.

Why should foreign residents invest in Israel?
When examining any type of investment and real estate in particular, one should check the essence and quality of the transaction on the one hand and the alternatives at the investors’ disposal on the other hand. The commercial real estate market in Israel, which suffered serious setbacks over the past 10 years of recession, has only began to reawaken over the past year. This phenomenon opens the window of investment opportunities to foreign investors, as real estate prices have not yet reached a peak.
For illustration purposes, if we are refer to a productive real estate transaction in the United States of America with AAA tenants, the returns that can be expected for the transaction stand at approx.5% – 7% in the event that the transaction was successful. In Israel, however a productive real estate transaction with AAA tenants would yield average returns of 7.5% – 10%.
It should also be noted that the prices at which properties are sold and the returns that are calculated in relation to the transactions have been determined according to “dated” leases that do not yet reflect the awakening that has taken place in the branch. Id est, there is further potential for profits latent in each transaction as a result of the improvement in the value of the real estate and increases in the value of leases in the future.

Financing real estate transaction in Israel differs from procedure abroad
Executing real estate transactions and productive real estate transactions particular is, for the most part, a financial transaction. We have often read that because of unsuitable loan conditions transactions do not eventuate, as the profitability of a transaction often relies on the financing ratio that the bank authorizes, the interest-rate and finally the method of repaying the loan which leads to examining the flow of cash that remains in the hands of the investor.. What is required and how is the financing ratio for foreign residents interested in acquiring real estate in Israel determined?

A financial affidavit – Because of the fact that foreign residents do not have a permanent income in the State of Israel, they are obligated to furnish a financial affidavit signed by an authority in their country of permanent residence. In the absence of this financial affidavit, it would be impossible to raise a loan. It is important to remember that the financial affidavit is used as a yardstick for determining the financing ratio to which the borrower would be entitled.
Personal guarantees -The vast majority of loans granted in Israel require personal guarantees. In contrast to the acceptable procedure abroad, the banks are not prepared to grant loans against a pledge on the property.
The financing ratio – the financing ratio is determined according to a number of major parameters. Firstly, an appraiser’s evaluation: Any loan acceptable to the bank will be determined subject to an appraisal received by the bank from a real estate appraiser. The financing ratio that the investor receives is derived from the appraiser’s assessment and not from the price of the property. Secondly, the nature of the investment: in a productive transaction the financing ratio would be affected by the quality of the tenant and could reach a level of 85% financing. In venture transactions, the financing ratio could decrease significantly to an average of 50%-60% financing.

Of course, the quality of the financial affidavit assists in determining the financing ratio to which the investor would be entitled. Since any loan taken requires a personal guarantee, the more economically solid the investor the greater the chances of receiving a higher financing ratio.

The key to structuring a successful transaction
Because of the fact that foreign investors execute transactions at a great distance from their places of residence, they have to operate with extreme caution and make sure that they are working in pursuance of the following keys factors:

A commercial environment – Much time should be invested in an in-depth research into the business environment of the property for investment. Care must be taken to ensure that it has not been static from an aspect of price and percentage leasing in relation to other properties in the area, as a deviation of over 20% to what is acceptable in the region should be a warning light and why we were entitled to such a premium should be examined thoroughly.
Taxation programs – foreign investors pay tax on their profits according to the treaties existing between their countries of permanent residence and the State of Israel. The key to building a sound real estate transaction is formulating a taxation plan appropriate for the existing treaty between the country in which you reside and the State of Israel. Proper tax planning could save many tax payments and increase the profitability rate.
Fiduciaries – Prior to executing a transaction, assistance by a qualified realtor or attorney at law who specializes in real estate etc. is vital, as they are key factors in analyzing the transaction. They know the market and the existing trends and in most cases act as your contact people in the country.

A fiduciary assists both in analyzing and formulating the transaction and most important of all he/she takes care of the property for you once you return to your permanent country of residence.
A fiduciary should only be chosen after a personal meeting or by the recommendation of someone whom you know personally. In any event it is extremely important to ask him/her to furnish additional recommendations in order to get an impression from other bodies.

Mr. Ronnie Kasrils is South Africa’s Intelligence Minister.

He has chosen to make many unintelligent remarks in an op-ed piece written by him for the Mail and Guardian on 18 May titled “Israel 2007 : worse than apartheid” which can be located at:

http://www.monitoringsa.com/PDFS/2007_05_18_380d2.pdf

Such remarks require rebuttal, especially as they have been uttered by a person of his prestige and stature.

Let me deal with some of these remarks that mouth so many similarly wild and unsubstantiated claims being uttered with growing frequency in the media by others under the guise of free speech.

1. “The West Bank and Gaza have become hermetically sealed prisons”

Freedom of movement between Gaza and Egypt is available through the Rafah border crossing and between the West Bank and Jordan through the Allenby Bridge.

Movement between Gaza and Israel and the West Bank and Israel is permitted but is more limited and subject to frequent closure during terrorist attacks or terror alerts.

How does this inflammatory and misleading statement serve any purpose?

2. “Its [the security barrier] route cuts huge swathes into the West Bank to incorporate into Israel the illegal Jewish settlements – some of which are huge towns – and annexes more and more Palestinian territory.”

The Israeli settlements are permitted in international law under article 6 of the League of Nations Mandate for Palestine and article 80 of the United Nations Charter provided that nothing is done which might prejudice the civil and religious rights of existing non-Jewish communities.

Where prejudice has been proved to have occurred in construction of the security barrier, Israel’s High Court of Justice has intervened and ordered relief and will continue to do so.

The West Bank is the only territory of the Mandate for Palestine remaining unallocated between Jews and Arabs, both of whom maintain claims that are still to be resolved.

3. “The West Bank, once 22% of historic Palestine,..…”

The West Bank is only 5% of historic Palestine.

Gaza is 1% of historic Palestine ,Israel is 17% of historic Palestine and Jordan is 77% of historic Palestine .

4. “It is shocking to discover that certain roads are barred to Palestinians and reserved for Jewish settlers. I try in vain to recall anything quite obscene in apartheid South Africa”

Really, is Mr Kasrils’ memory that short ? – no blacks in restaurants or on “whites only” buses, no rights for the black majority to vote or control their own futures, separate toilets at the airports and all other public places, the banning of sex between the races – to name but a few.

Mr Kasrils was in the forefront in fighting apartheid in South Africa. What on earth did he think he was fighting?

Mr Kasrils is really insulting our intelligence with this kind of fatuous remark.

Mr Kasrils’ concern for the Palestinians is obviously sincere and well intended .

However his inane remarks leads one to conclude that his views have been formulated as a result of some fairly basic misunderstandings of the conflict that has been going on since the 1880’s in what was once called Palestine.

The ongoing refusal of the Arabs to countenance the right of Jews to have their own State in their biblical and ancestral homeland comprising 0.001% of the territory freed from Ottoman occupation by Britain and France in 1917 as part of a package deal that handed the Arabs the remaining 99.999% – eventually leading to the creation of such states as Syria, Saudi Arabia, Iraq, Lebanon and Jordan – still remains the sticking point in the throats of the Arabs to this very day.

Looking at Palestine only in isolation is the trap into which many well meaning persons stumble.

The Arabs now have 22 States in which hardly a Jew lives and in which selling land to Jews is punishable by death . Arabs involved in selling land to Jews in Jerusalem have been hunted down and murdered. Try and enter Saudi Arabia if you are a Jew.

The Jews have one state – Israel – in which over 20% of the population – or more than one million – are Arab citizens. They eat in the same restaurants, travel on the same buses, use the same toilets and yes, vote in elections and even intermarry with Jews.

Who is practising apartheid?

Yes, the Arabs of the West Bank and Gaza are doing it tough – but they have no one but themselves and their intransigent brethren to blame for the sorry position they find themselves in.

There was a time between 1948-1967 when Statehood in the West Bank and Gaza and even part of what is now Israel could have been achieved with the stroke of a pen. What is yearned for now was rejected then. What was available then is not available now.

This reality still eludes the Arabs as they call for 400000 Jews to pack up and vacate every square inch of the West Bank. This is cuckoo land thinking and is bound to ensure the conflict will continue.

Whilst persons like Mr Kasrils continue to make their judgements based on facts that are demonstrably wrong, they will continue to give fuel to Arab demands that are impossible for Israel to accept.

Let the influential Mr Kasrils support handing over sovereignty of the Arab occupied areas of the West Bank to Jordan as a means of ending the indignities he witnessed on his recent wanderings.

That would be an intelligent contribution to resolving the Arab-Israeli conflict. His article certainly isn’t.

Israel is a country filled with beaches and beautiful sights not to be missed. When tourists visit this small country, they are in for a lovely surprise. It is a country filled with traditions and culture, so rich and not available anywhere else in the world. A country that ranks on top of the list when talking about a place that works towards human development, Israel has a lot to offer to this world.

Akko is a fortress that has withstood more than its share of rulers and the climatic changes and is very popular with tourists. This fortress located by the sea was home to Alexander the Great and even known as the Crusader city of the Acre. Right opposite the main entrance is the Mosque of Al Jazzar, which has a distinct Turkish architectural style on the exterior. All these will have you gasping in awe at this magnificient place.

Most tourists visiting Israel want to visit the Black Sea. This world famous tourist attraction is well worth a visit during your holiday in Israel. The water in this ocean is filled with minerals, and there is apparently 10% more oxygen here than elsewhere. The beauty of the Dead Sea is that nothing sinks, everything will float and it is said to have good healing powers for people who swim in it.

The capital city of Israel, Tel Aviv is where the business booms and industries flourish. The city has its share of long stretches of beaches, bars and restaurants that will captivate every visitor to this beautiful land. Most of the people living here migrated from other parts of the world, and so it is a melting pot of culture, and traditions. Make a trip to the Diaspora museum, which will educate the tourists about Jewish culture while in exile; or to the Museum of Art to learn more about this fascinating place.

Ein Avdat National park is hidden from the main road and is the most popular tourist attraction in Israel. In the middle of the desert, a pool of cold water exists, apart from which, there are steep canyons and scenery like nowhere else in the world. Plenty of open space to walk in, but be prepared for the long journey, which can get tiring and challenging, even for the physically fit. The vast variety of flora and fauna in this region makes the tiring journey completely worth it.

An archaeological site, Tzipori is all about the Hasmoneans who settled here back in the 2nd century. This place subsequently became the capital of Gailee, but today is filled with ruins of the original roadways and towering forts that was once standing tall. There is even a Roman villa, with beautiful interiors, mosaic floors, and an array of underground system of cisterns for the curious tourists to quench their curiousity in, while travelling in Israel.

Many holiday makers come to Israel and rent holiday accommodation as holiday homes. They can rent holiday villas or self catering holiday apartments in Israel direct from their holiday home owners.