ITA published a new mandatory reportable tax position for import taxes: value of software imported with goods
6 January 2021
Dear Clients and Colleagues,
The Israeli Tax Authority (ITA) published lists of mandatory reportable tax positions for the 2020 tax year. In contrast to an income tax related tax position, which must be reported with the yearly tax return, in the case of VAT and import taxes (customs, purchase tax and import VAT), the reporting of the tax positions must be submitted online via the ITA’s website, using specific forms published by the ITA. The form must be submitted within 60 days from the end of the tax year in which the reportable position was taken. The submission deadline date for the 2020 tax year is 01/03/2021.
It should be noted that the ITA’s lists of tax positions is a cumulative list, so that the new position joins those that have already been published in previous years, which also remain reportable positions in the relevant cases.
The new tax position published regarding import taxes concerns the value of the software used to operate the imported goods. The software discussed may be imported separately with the goods or installed on the imported goods.
According to the position, the value of the software is part of the value of the goods for import taxes, even if it is generic software. In addition, the value of specific software used for the initial activation of certain functions in specific imported devices is part of the goods’ value for import tax purposes. This is the case, even if the software is imported separately from the goods. It should be noted that this position excludes generic software designed to operate devices produced by different manufacturers.
However, the ITA clarified that this tax position regards only goods that are liable for import taxes (other than VAT, such as customs and / or purchase tax). This does not detract from the VAT liability imposed on software imports in accordance with the VAT Law.
For your convenience, please find below links to the lists of the tax positions (in Hebrew), which require reporting regarding import taxes, VAT and excise tax for the 2020 tax year.
For a list of the Tax positions which require reporting regarding import taxes: click here
For a list of the Tax positions which require reporting regarding VAT: click here
For a list of the Tax positions which require reporting regarding excise taxes: click here
We will be happy to provide legal advice regarding the situation where a tax position, which requires reporting, should be taken, and in general, regarding any issue arising from the submission of the report, and of course to answer any questions you may have on this matter. It should be noted that failure to report a position that is legally reportable may have both civil and criminal consequences and in certain case may lead to penalties.
We will be happy assist for any questions and clarifications that may be required.
Herzog Fox & Neeman
Meir Linzen | Managing Partner
Head of Tax Department
Iris Weinberger | Partner