New Israeli Income Tax Ordinance section 3(i1), enacted on December 29, 2016 and effective January 1, 2017, states that a loan from an Israeli company which is granted to its 10 percent or more shareholders or to their related parties may be deemed to have been distributed to these shareholders. The deemed distribution takes place at the end of the year following the year in which the loan was extended. The deemed distribution is considered as a dividend to the extent of the Israeli company’s distributable earnings as determined under Israeli corporate law while the excess deemed distribution amount over such distributable earnings is considered in certain circumstances as employment or business income.

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