As with most OECD countries, Israeli companies and/or PEs are required to meet the local transfer pricing requirements, which include to hold an intercompany agreement as well as a transfer pricing study. Reporting to the Israeli Tax Authorities is made under form 1385. As of December 23, 2022, this form has been amended and now includes a requirement to disclose how the transfer pricing was determined, i.e. in accordance with the local safe harbor rules, as a one-time transaction (an option which is going to lapse soon) or in accordance with an existing transfer pricing study.

Some of the local companies and/or PEs have not been holding a transfer pricing study at all, or have settled for a transfer pricing memo (which is a partial document not fulfilling the local requirements), awaiting an audit in order to prepare a complete transfer pricing study (which fully complies with local requirements).

Said change in reporting may bear significant effects on local companies since the form is signed similar to an affidavit, with the signing person declaring that all the information included in the form is “correct, complete and accurate”. A company which does not hold a complete transfer pricing study can either declare so – and “invite” an audit, or – if it states that it does while it does not actually hold a complete contemporaneous transfer pricing study, it will be subject to fines (Knas Gera’on) and potential criminal liability for making a false representation to the tax authorities.

We note that financial transactions are reported on a separate form, form 1485; and that the form 1585, governing Master File (for groups with over NIS 150M in consolidated results) and CbCR, is expected shortly.

Herzog is the only law firm in Israel with a complete transfer pricing department, which includes attorneys; accountants; and economists, and which prepares transfer pricing studies; memos; and policies. We will be happy to answer any questions.

Eyal Bar-Zvi | Partner
Head of Transfer Pricing
Tax Department
​barzvie@herzoglaw.co.il