PART SIX: CHARGEABILITY TO TAX
THROUGH A REPRESENTATIVE
Trustees, etc., of legal incompetents
106. A liquidator or a receiver appointed by the Court or under any statute that is in
effect in Israel, as well as a trustee, guardian of a person or property, or a
committee that has the direction, control or management of any property or
enterprise on behalf of a legal incompetent shall be chargeable to tax in the
manner and amount, in which that person would be chargeable, were he not
a legal incompetent.
Foreign resident with an agent in Israel
108. A foreign resident, whether an Israel citizen or not, shall be assessable and
chargeable through his trustee, guardian or committee, or in the name of his
attorney, factor, agent, receiver, branch or manager, whether they receive the
income or not, all in the manner and in the amount in which that foreign
resident would be assessed and charged, if he were an Israel resident and if
that income were received by him.
Income of foreign resident from power of attorney, etc. 179
109. A foreign resident shall be assessable and chargeable in respect of any
income that arises, directly or indirectly, from any power of attorney, agency,
authorization, receivership, branch or management, or through any of those,
and he shall be assessable and chargeable through the attorney, factor,
agent, receiver, branch or manager, all as the case may be.
110. The master of any ship owned or chartered by a foreign resident chargeable
under the provisions of sections 71 to 74, shall be deemed the agent of that
foreign resident for purposes of this Ordinance, without excluding any other
agent of that foreign resident.
Business with a foreign resident
111. If a foreign resident carries on business with a resident, and it appears to the
Assessing Officer that, because of the close connection between them and
because of the substantial control exercised by the foreign resident over the
resident, the course of business between those persons may be arranged –
and that it is arranged – so that the business done by the resident in pursuit
of his connection with the foreign resident produces no profit for him or less
than the ordinary profit that is to be expected from that business, then the
foreign resident shall be assessable and chargeable to tax through the
resident, as if the resident were his agent.
Procedure when the amount of a foreign resident's income cannot
112. (a) If the Assessing Officer finds that the true amount of earnings or profits
of any foreign resident, which are chargeable through a resident,
cannot be readily ascertained, then he may assess and charge the
foreign resident a fair and reasonable percentage of the turnover of the
business done by the foreign resident through or with the said resident;
when the Assessing Officer has done so, the provisions of this
Ordinance on the delivery of returns or particulars by persons who act
on behalf of others shall apply to this case, obligating the resident to
deliver returns or particulars of the said business in the manner in
which persons who act on behalf of legal incompetents or foreign
residents must deliver returns or particulars about chargeable income.
(b) The said percentage shall in each case be determined by the
Assessing Officer while taking the nature of the business into account,
and when it has been determined, it may be appealed, as provided in
sections 153 to 158.
Transactions between foreign residents
113. If a foreign resident executes sales or carries out transactions with other
foreign residents in circumstances which would make him chargeable through
a resident in pursuance of sections 110 and 111, that fact alone shall not
make him chargeable in respect of gains or profits arising from the said sales
Assessment of a foreign resident's income from the sale of foreign products
114. If a foreign resident is charged to tax through any attorney, agent, licensee,
receiver, branch or manager, in respect of earnings or profits derived from the
sale of goods or products manufactured or produced abroad by that foreign
resident, then the person through whom the foreign resident was so charged
may apply to the Assessing Officer to have the tax assessment in respect of 180
those earnings or profits made or amended on the basis of the profits which
might reasonably be expected to have been earned by a merchant or retailer
who buys directly, as aforesaid, from the manufacturer or producer, if the
goods or products were sold or retailed by them or on their behalf, and after
he proves, to the Assessing Officer's satisfaction, the amount of those profits,
the assessment shall be made or amended accordingly.
Foreign resident not to be assessed through an agent who is not
his authorized agent
115. None of the provisions of sections 108 to 114 shall render a foreign resident
chargeable through a broker or general commission agent or other agent, in
respect of earnings or profits that arise from a sale or transaction carried out
by them, if those are not authorized agents who regularly carry on the foreign
resident's agency, or if they are not authorized agents in accordance with
sections 110 to 112.
Acts that must be performed by trustees, etc.
116. If a person is assessable and chargeable in respect of a legal incompetent, or
if a foreign resident is chargeable in his name, then he shall be responsible
for all matters required to be done under this Ordinance for the assessment
of the income of the person for whom he acts, and for the payment of the tax
payable on it.
Manager of a body of persons
117. The manager or other principal officer of an incorporated body of persons
shall be responsible for the performance of all acts and things, performance
of which is required under this Ordinance for the assessment of that body of
persons and for payment of the tax.
Records that must be prepared by a representative or agent
118. If a person in whatever capacity receives anything in cash or in kind, which is
income derived from any of the sources enumerated in this Ordinance and
which belongs to a person chargeable in respect of that income, or who
would be so chargeable if he were an Israel resident and not a legal
incompetent, then he shall, whenever the Assessing Officer requires him to
do so by a notice and within the time stated in that notice, prepare and deliver
a record signed by him, containing a true and correct statement of all
aforesaid income and the name and address of every person to whom the
income belongs; the provisions of this Ordinance, which concern the failure to
deliver records or particulars in accordance with a notice from the Assessing
Officer, shall apply to the said record.
Indemnification of representative
119. A person responsible under this Ordinance for the payment of tax for another
person may retain, out of the money that comes into his possession for that
person, an amount sufficient to pay the said tax, and he is thereby
indemnified against any person whatsoever for all payments made by him in
pursuance and by virtue of this Ordinance.
Tax collection under special circumstances
119A. (a) (1) If a body of persons had a tax debt and is wound up or transfers
its assets for no consideration or for partial consideration without
being left with the means in Israel to pay the said debt, then the
body's tax debt may be collected from whoever received the 181
assets under the said circumstances.
(2) If a body of persons has a final tax debt and it transfers its activity
to another body of persons, which directly or indirectly has the
same controlling members or their relatives (in this paragraph:
the other body) for no consideration or for partial consideration,
without being left means in Israel to pay the said debt, then the
body's tax debt may be collected from the other body.
(3) Without derogating from the provisions of paragraphs (1) and (2),
if a body of persons had a final tax debt and was liquidated or
terminated its activity without paying the said tax debt, then the
assets which the body had are deemed to have been transferred
to its controlling members for no consideration and the tax debt
may be collected from them, unless different facts are proven to
the Assessing Officer's satisfaction.
(b) If an individual had a final tax debt for any tax year, and if he transferred
his assets without consideration or for partial consideration to a relative
or to a company in which he is a controlling member, without being left
with means in Israel to pay the said debt, then the debt he owes may be
collected from whoever received the assets under the said
circumstances, as long as three years have not passed since the end
of the tax year in which the tax debt became final or in which the assets
were transferred, whichever was later.
(c) No more shall be collected from whoever received the assets or
activities under subsections (a) or (b), than the value of the assets or
activities he received for no consideration, or no more than the
difference between the partial consideration he paid and the value of
the assets or activities, and if he paid tax in connection with the transfer
of the said assets or activities, then no less than the said value or
difference, less the amount of tax paid.
(c1) If the manager of a body of persons, who is a controlling member of
that body, was convicted of not transmitting tax deducted under
sections 219 or 224A, and if it is no longer possible to appeal against
his conviction, or if he paid monetary composition because of offenses
under those sections, then the tax deducted as aforesaid and not
transmitted to the Assessing Officer may be collected from him.
(c2) If a body of persons was assessed because of one of the acts specified
in section 220 and the body's appeal against the assessment was
rejected by the Court in a judgment that no longer is subject to appeal
or against which no appeal was lodged with the Court, then the tax debt
not paid by the body may also be collected from a person who held a
position in that body when the said act was committed, if the Assessing
Officer has a priori evidence that the act was committed with the
knowledge of the holder of that position, unless the holder of that
position proves that he took all reasonable steps to ascertain that the
act be prevented.
(d) In this section –
"tax debt" – within its meaning in section 195A, other than a debt of
"final tax debt" – a debt in respect of which there no longer is any right
of objection, contestation or appeal;
"relative" – as defined in section 88;
"controlling member" – any person who, alone or together with his
relative, holds at least 25% of one of the rights enumerated in the
definition of "controlling member" in section 32(9)(a); 182
"holder of a position" – an active manager, partner or controlling
(e) The Taxes (Collection) Ordinance applies to the collection of amounts
under this section.
(f) A decision to collect a tax debt under this section may be contested
before the Director within 21 days after the day on which notification
thereof was served; a decision by the Director under this subsection
may be appealed before the District Court within thirty days after the
decision was served.
Assessing the income of a deceased person
120. (a) If a person died during the tax year and if that person, had he not died,
would have been chargeable to tax for that tax year, or if a person died
within three years after the end of a tax year and no assessment had
been made for him for that year, then his legal personal representative
shall be liable for the tax with which that person would have been
chargeable if he were alive, and he shall pay it and shall also be
responsible for the performance of all those acts and things for which
that person would have been responsible under this Ordinance, if he
(b) From the day of a person's death, the chargeable income of his estate
shall be deemed income of the heirs, in accordance with their shares in
the income of the estate.
(c) If all or some of the heirs or their parts in the income of the estate are
not known, then the personal legal representative of the deceased shall
pay, out of the estate, tax at the rate of 40% on account of the tax due
from the heirs on the income of the estate.
(d) The provisions of sections 174 to 181 shall apply, mutatis mutandis, to
payments on account of tax under subsection (c).
(e) After the income of the estate has been distributed and included in the
income of each heir, the tax paid as aforesaid by the personal legal
representative shall be set off against the tax on the income of the
heirs, according to the respective part of each in the income of the
(f) For purposes of this section: "personal legal representative" includes
an heir, estate manager, executor of the deceased person's will and
every person who may – under a statute or under a Court decision –
deal with the assets of the estate.