On May 6, 2018 a revolutionary decision of the Supreme Court in the Or Sarah case, was published. The decision determines that capital gains of Family Companies should be calculated in New Israeli Shekels (NIS), with the cost basis adjusted to the Israeli Consumer Price Index, and not to the foreign currency in which the security is denominated. This calculation creates a situation in which the “built in” appreciation of the foreign currency is subject to tax, whilst losses arising from the depreciation in the value of the currency can be offset.

It is strongly recommended that taxpayers who own Family Companies should examine the implications of this decision on their tax liability, as well as their entitlement to submit amended tax returns and to request a refund for previous years.

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