PART TEN: PAYMENTS AND COLLECTION

CHAPTER ONE: DEDUCTIONS ON ACCOUNT OF TAX

Article One: Deductions from Dividend and Interest

161. Repealed

Set off of tax on dividend and interest
162. If a body of persons deducted tax from interest or dividends, and if that
interest or dividend or part of it is included in the recipient's income, then the
tax deducted shall be set off against the tax imposed on that income.

Relief from tax on the dividends of foreign companies from Israel income
163. (a) If an ordinary dividend was paid to a person who under this Ordinance
is liable to tax on it, and if he proves to the Assessing Officer's
satisfaction that the dividend was paid by a company that is not resident
in Israel and that the company's income, out of which the dividend was
paid (hereafter: the relevant income) includes income on which the
company paid tax under this Ordinance, whether by deduction or in
some other manner (hereafter: Israel income), then he shall be entitled
to tax relief on a proportional part of the dividend, in the proportion of
the Israel income to all the relevant income (hereafter: Israel dividend).
(b) The rate of relief shall be equal to the rate of tax paid by the company
under this Ordinance or to the rate of tax applicable to the Israel
dividend, treated as the highest part of that person's income, whichever
is the lower rate.
(c) If relief was granted to a person under this section in respect of an
Israel dividend, then both the amount of that relief and the amount of
the dividend shall be deemed his income from that dividend.
(d) Any relief granted under this section shall, for the purposes of section
201, be deemed to reduce the amount of tax chargeable under this
Ordinance in respect of the said dividend.
(e) For purposes of this section:
"ordinary dividend" a dividend on a share which is not a preferred
share and also that amount of dividend on a preferred share which is
not paid at a gross percentage rate;
"preferred share" a share which carries the right to dividends at a
fixed gross percentage rate, payable before any dividends on other 219
classes of shares, whether or not it also carries the right to some further
participation in profits;
"tax" not including companies tax.


Article Two: Deduction from Work Income and from Other Income

Obligation to deduct at source
164. Any person who pays or is responsible for the payment of work income,
including the part of a grant received in consequence of retirement or death
that is not exempt under section 9(7a), of earnings or profit that stem from
gambling, lotteries or prize winning activity, as said in section 2A, of the
amount received from capitalization of a pension which is not exempt under
sections 9A or 9B, of amounts and payments to which section 18(b) applies
and which constitute income for their recipient, of income under section 2(5),
of chargeable income that a real estate investment fund, as defined in section
64A2, transmits to its members, of consideration within its meaning in section
88, of interest or dividends, or of any other income which the Minister of
Finance with approval by the Knesset Finance Committee so designated by
Order, shall when payment is made deduct tax from the amount to be
paid in the manner and at the rates prescribed, but the Minister of Finance
may prescribe that in respect of gains or profit said in section 2A the tax
deduction shall be as he shall prescribe, even if not at the time payment is
made and not out of the amount to be paid; this provision also applies to the
State.

Set off of deduction
165. (a) The said deduction shall be set off against the tax due from the
recipient's chargeable income in the tax year in which the deduction
was made or in the following tax year, at the Assessing Officer's option
at the time of or before the assessment.
(b) A set off under subsection (a) against the tax to which a controlling
member, as defined in section 32(9), is liable shall only be made after
the deducted amount has been paid to the Assessing Officer, unless
the member's control is less than 50% and he proves to the Assessing
Officer's satisfaction that he did not know that the deducted amount had
not been paid to the Assessing Officer or that he took all reasonable
measures to ensure its payment.

Obligation of person who makes the deduction
166. (a) When a person has deducted tax under section 164, then he shall pay
the amount of tax deducted to the Assessing Officer at the time
prescribed by regulations, and at the same time he shall deliver to him
a return as prescribed.
(b) An employer or a person who deducted shall submit a return said in
subsection (a) in respect of the payment of an employee's work income
(Form 0126) and in respect of income liable to deduction (Form 0856)
in the online manner, as the Director shall prescribe, until April 30 after
the tax year in respect of which it is submitted, together with a
declaration on a Form prescribed by the Director, according to which
the particulars and the information given in the return are correct and
complete, as well as a printout of the said return signed by him
(hereafter: employer's online return and deductor's online return, as the
case may be). 220
(c) In this section
"income liable to deduction" payments designated under section
164 as income for purposes of the said section, as specified below:
(1) insurance commission;
(2) artists', examiners' and lecturers' fees,
(3) writers' fees;
(4) payments for agricultural work or produce;
(5) payments for construction work and haulage;
(6) payments for garment making, metal work, electrical and
electronic work and haulage;
(7) payments for diamond work;
(8) payments for services or assets;
"employee" other than an employee who works in an individual's
private household.

Assessing Officer may assess deductions
167. (a) If a person, to whom the provisions of sections 161 or 164 apply, did
not deduct tax as provided by them or did not deliver a return as said in
sections 161 or 166, or if he delivered a said return, but the Assessing
Officer has reasonable grounds for believing that the return is not
correct, then the Assessing Officer may, to the best of his judgment,
assess the amount that person should have deducted, and this
assessment shall not relieve that person from any other responsibility
under this Ordinance; an assessment under this subsection shall be
treated like an assessment under section 145; the Assessing Officer
may assess a person as said in this section during the period said in
paragraph (1) or in paragraph (2), whichever is later:
(1) during the period in which he may to the best of his judgment
determine that person's chargeable income for the tax year in
which is obligated to deduct tax;
(2) within three years after the end of the tax year in which the liable
person's last deductions return for the tax year was submitted
under the provisions of sections 161, 164 or 234, and with the
Director's approval within four years after the end of the said tax
year.
(b) The provisions of subsection (a) shall also apply when an assessment
or an Order which is no longer open to contestation or appeal has been
made for the year to which the return relates in respect of the person
from whose income the tax should have been deducted, if that
assessment or Order does not include the income from which the
deduction should have been made.

Right of objection
168. If a person disputes the correctness of an assessment under section 167, he
may, within two weeks, deliver a written objection to the Assessing Officer,
and the provisions of sections 150 to 158 shall apply as if the objection had
been filed under those sections; the amount of tax, determined by the
assessment by Order under section 152(b) or in an appeal under section 153,
shall be paid within seven days after notice of assessment was delivered or
after the Order was made or the judgment handed down, all as the case may
be, or by another date prescribed by regulations.

169. Repealed
221


Article Three: Deduction from Foreign Resident

Obligation of person who pays to a foreign resident
170. (a) A person who pays to a person who is not resident in Israel or to
another for him any income that is chargeable under this Ordinance
other than income from which tax was deducted under sections 161 or
164 shall deduct from that income tax at the rate of 25 agorot for
every shekel at the time of its payment, if the recipient of the payment is
an individual, or tax at the rate imposed by sections 126 and 127 if the
recipient is a body of persons, or at another rate the Assessing Officer
will prescribe for them by written notice; however, the Assessing Officer
may permit the income to be paid without deduction of tax, if it has been
proven to his satisfaction that the tax already was paid or that it will be
paid in some other manner; for this purpose: "person who pays"
includes a financial institution, as defined in the Value Added Tax Law
5736-1975, through which the income is paid, unless the financial
institution holds certification from the Assessing Officer, exempting it
from the obligation to deduct at the source.
(b) The provisions of subsection (a) shall not apply to a person who pays
income said in subsection (a) and who, under sections 108 to 115, is
himself responsible for paying tax on it.
(c) Notwithstanding the provisions of subsection (a), if a real estate
investment fund, as defined in section 64A2, transmits chargeable
income of shareholders, within its meaning in section 64A4, to a person
not resident in Israel, then it shall deduct from it tax at the tax rate that
obligates it under the said section.

Obligation of the person who deducts from a foreign resident
171. When a person has deducted tax under section 170(a), then he must pay the
amount of tax he deducted to the Assessing Officer within seven days after
the day of deduction, and he shall deliver a return to him, specifying the name
and address of the person to whom or for whom the income was paid.

Set off of deduction
172. The amount of deduction under section 170 shall, for purposes of collection,
be set off against the tax that will be imposed on the person who received the
said income.
Assessing Officer may assess deduction
173. If a person is under obligation to deduct tax under the provisions of this Article
and does not deduct all or part of the amount, or if he did not deliver a return
said in section 171, or if he delivered a said return but the Assessing Officer
has reasonable grounds for believing that the return is not correct, then the
Assessing Officer may assess the amount of tax which that person was
obligated to deduct to the best of his judgment; an assessment under this
section shall be treated like an assessment under section 145; the Assessing
Officer may assess a person said in this section during the period during
which he may determine to the best of his judgment that person's
chargeable income in the tax year in which he was under obligation to deduct
the tax; that assessment shall not relieve that person from any other
responsibility under this Ordinance.

222

Article Four: Auxiliary Powers

Power to enter, inspect and interrogate
173A.(a) If the Assessing Officer deemed it necessary to do so in order to
ensure compliance with the provisions of this Chapter or with any
provisions on tax deduction at the source or in order to prevent evasion
from compliance with them, then he or a public servant so authorized
by him in writing may
(1) enter the premises except a dwelling not used for his business
or vocation of any person who must deduct tax at the source, or
who has possession of the books and documents that relate to
tax deduction at the source, and he may inspect any register,
record, certificate or other document related to tax deduction at
the source, which is in their possession;
(2) interrogate any person who is required to deduct tax at the
source or who has possession of the books and documents that
relate to tax deduction at the source or from whose income the
tax must be deducted;
for the purposes of paragraphs (1) and (2), "tax deduction at the
source" deduction of tax under sections 161, 164 or 170.
(b) If a person is interrogated or if his premises are inspected under
subsection (a), then he shall give the person who interrogates him or
who makes the inspection every opportunity to do so, and he shall
answer all questions put to him completely and truthfully.
(c) The provisions of this section shall not derogate from any powers of an
Assessing Officer or public servant under this Ordinance.



Article Five: Miscellaneous Provisions

Postponement because of holidays
173B. The last date for the submission of a return under this Chapter shall be
postponed, if there were at least three days of rest during the five days that
preceded the said date, and it shall be on the fourth working day after the end
of the consecutive days of rest; for this purpose: "days of rest" the days of
rest prescribed in the State of Israel within their meaning in section 18A(a) of
the Law and Administration Ordinance 5708-1948, as well as interim festival
days.



CHAPTER TWO: COLLECTION

Article One: Advance Payments

Definition
174. In this Article, "the determining year" the last tax year in respect of which
the income of the assessee was assessed by January 1 of the tax year,
whether or not objection was lodged.

Assumption
174A Spouses shall be deemed, for purposes of this Article, a single assessee; this 223
provision shall not derogate from the provisions of section 66A.

Advance payments
175. (a) On the fifteenth day of each of the ten months from February to
November of each tax year every assessee shall, on account of the tax
for that tax year, make an advance payment of 10% of the amount of
tax to which he became liable for the determining year; however, if that
taxpayer was allowed to calculate his income according to a special
period, as said in section 7, then he shall pay the said advance on
account of tax for the tax year in which ends the special period that
includes the date for the said advance payment.
(b) Notwithstanding the provisions of subsection (a), the Minister of
Finance may prescribe, with approval by the Knesset Finance
Committee, in general or for categories of assessees, monthly advance
payments that shall be a portion of those assessees' turnover of
transactions during the period during which the advances are paid; the
rate of advance payment shall be set according to the ratio between the
assessee's turnover of transactions in the determining tax year and the
tax he was obligated to pay in that year on that turnover; for this
purpose: "turnover of transactions" the total of transactions, as
defined in the Value Added Tax Law 5736-1975, excluding sales to
which Part Five or the Land Appreciation Tax Law 5723-1963 apply; the
Minister of Finance may in Rules add or detract categories of
transactions, of income or of sales, either in general or for categories of
assessees, all on conditions which he shall prescribe.
(c) If, during the determining tax year, a body of persons paid amounts
said in section 18(b), other than a regular monthly salary and
repayment of expenses (hereafter in this section: payments to a
controlling member) to an individual who is a controlling member within
its meaning in section 32(9), then its advances shall be in the amount it
would have paid in that year, had it not made payments to the
controlling member.
(d) The amount of advance payments by a body of persons shall be
reduced by the amounts of tax it withheld under section 164 from
payments to controlling members.
(e) If a transparent company received a dividend, then the amount of the
first advance to be paid after it was received by it or by the share
holders, within their meaning in section 64A1, shall be increased by an
amount equal to 25% of the dividend.
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As long as the provisions of section 64A remain in effect, subsection (e)
should be read as it was before Amendment No. No. 132, as follows Tr.
(e) If a family company received a dividend, then the amount of the first
advance to be paid after it was received by it or by the assessee,
within its meaning in section 64A, shall be increased by an amount
equal to 25% of the dividend.
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(f) The last date for payment under this section shall be postponed, if
there were at least three days of rest during the five days that preceded
the said date, and it shall be on the fourth working day after the end of
the consecutive days of rest; for this purpose: "days of rest" the days
of rest prescribed in the State of Israel within their meaning in section
18A(a) of the Law and Administration Ordinance 5708-1948, as well as
interim festival days. 224

176. Repealed

Crediting payments against advances
177. (a) An amount deducted during the tax year at the source under sections
161 and 164 to 170 from the assessee's income in that tax year shall
be deemed a payment on account of advance payments to which that
assessee is liable under section 175 in respect of the income from
which the tax was deducted, and he is entitled to set off any sum
deducted at the source during the tax year in respect of which the
advance payments are to be paid against his advance payments, on
condition that he has written certification of that deduction.
(b) An amount paid as an advance under section 181B in respect of an
excess expenditure incurred in that tax year shall be deemed a
payment on account of the advances which that assessee must pay
under section 175, and he is entitled to set it off against his advances,
on condition that he holds written certification of the payment of the
advance in respect of excess expenditures.
(c) The provisions of subsection (b) shall not apply to an amount paid as
an advance in respect of excess expenditures by a body of persons, to
which the provisions of section 3(g) apply.

Doubt as to tax for the determining year
178. If the amount of tax for the determining year is in dispute, but is greater than
the amount of tax last finally determined, then the monthly advance payment
shall be calculated according to that part of the amount of tax for the
determining year which is not in dispute, or according to the amount of tax
determined as aforesaid, whichever is the larger amount; "finally
determined", in this section by a determination not open to objection or
appeal.

Minister of Finance may change rates and times
179. The Minister of Finance may, by Order, increase or reduce the rate of
advance payments under this Article, change their payment dates or
prescribe that they be paid once every two months or at other intervals set by
him; he may also prescribe different rates of advance payments in respect of
different determining years and with approval by the Knesset Finance
Committee for each of the advance payments during the tax year, or for
different categories of assessees.

Assessing Officer may exempt or increase
180. (a) An Assessing Officer may exempt a person from all or part of an
advance payment under this Article, if it was proven to his satisfaction
that the tax for the year in which the advance payment is payable and in
respect of which that assessee is likely to be liable to tax will be less
than the tax to which he is liable in respect of the determining year, but
he shall not so exempt a person who is required to keep account books
and does not do so.
(b) (1) If the amount of tax which the assessee must pay according to a
return submitted by him under section 131 during the tax year
and for this purpose the Minister of Finance may prescribe a
percentage by which the said amount of tax shall be increased
exceeds the amount of advance payments to which he is liable in
respect of that year, then the Assessing Officer may increase the 225
amount of advance payments under this Article by the amount of
the said differential.
(2) If the Assessing Officer has reasonable grounds for believing that
the tax which will be due from an assessee for a particular tax
year will exceed the amount of the advance payments to which
he is liable for that year by at least 20% or by at least NS
500,000, whichever is the lesser amount, then he may increase
the amount of advance payments under this Article by the
differential; an aforesaid decision shall, for purposes of objection
and appeal, be treated like an assessment under section 145.
(c) If an individual kept account books in the tax year and in the year that
preceded it, but did not and was not required to keep account books in
the year which serves as basis for the determination of advance
payments in the tax year, and if the tax to which he is liable for the
preceding tax year according to the return submitted by him and
based on account books is less than the amount of advance
payments, then the amount of advance payments to which he is liable
in respect of the tax year shall be reduced to the amount of tax to which
he is liable according to the return.

Person not previously assessed
181. If an assessee has chargeable income and previously he was not liable to tax
or was not assessed, then he shall make the advance payments under
section 175 or 176, as the case may be, in percentages of the projected
amount of tax which he is likely to have to pay on that income in that tax year
according to his estimate, and with the first payment he shall submit to the
Assessing Officer a declaration of the said estimated tax, and an additional
declaration six months after the first declaration was submitted; if he did not
deliver the said declarations, or if he delivered such declarations, but the
Assessing Officer has reasonable grounds for believing that the declarations
are not correct, then the Assessing Officer may to the best of his judgment
set the amount of the advance payment which that assessee must pay, and
a said determination shall, for purposes of objection or appeal, be treated like
an assessment under section 145.

Power to grant reduction
181A. The Minister of Finance may, with approval by the Knesset Finance
Committee, prescribe by regulations reductions to be granted to persons who
make advance payments under this Article before the time prescribed for their
payment or who make advance payments in amounts greater than what is
due from them, all at rates and on conditions prescribed by him either
generally or for particular categories of assessees.



Article One "A": Advance Payment for Nondeductible Expenses

Advance payment for excess expenses
181B. (a) If, for purposes specified in regulations under section 31, a body of
persons spent amounts which according to the said regulations are not
deductible or which exceed the amounts set as deductible, or if it spent
amounts for expenses which according to section 32(11) are not
deductible (in this Law: excess expenditures), or if it paid a levy under
Chapter Six of the Arrangements in the State Economy (Law 226
Amendments) Law 5749-1989, then it shall pay the Assessment Officer
at the prescribed time an advance payment at the rates specified below
of the excess expenditures which it incurred, and at the same time it
shall submit to him a prescribed return and it shall also submit to him an
annual return specifying and summing up all the excess expenditures
which it incurred in that year, all as specified below:
(1) a body of persons, to which section 3(g) applies 90%;
(2) any other body of persons 45%;
for purposes of this section: "body of persons" exclusive of
partnerships that do not include any partner that is a body of persons to
which this section applies.
(b) The provisions of subsection (a) shall not apply to amounts paid as
work income from which the person who pays them or is responsible for
their payment deducted tax under section 164.
(c) If a body of persons did not make the advance payments said in
subsection (a), or did not deliver a return under that subsection, or
delivered a return but the Assessing Officer has reasonable grounds for
believing that the return is not correct, then the Assessing Officer may
to the best of his judgment assess the amount of advance payment
which that body of persons must pay, and that assessment does not
relieve it of any other obligation under this Ordinance; an assessment
under this section shall be treated like an assessment under section
145; the Assessing Officer may assess a person as said in this section
during the period during which he may determine to the best of his
judgment that person's chargeable income in the tax year in which he
was under obligation to pay the advance.

Set off against future tax
181C. If a body of persons, to which the provisions of section 3(g) do not apply,
made advance payments under section 181B for a certain tax year in an
amount that exceeds the amount of tax which it must pay in that year, then
the excess shall not be refunded to it; however, if its income from the same
business or vocation will be liable to tax including Land Appreciation Tax
in subsequent tax years, then the excess amount shall be set off against the
tax or the Land Appreciation Tax; the excess amount shall be adjusted at the
rate of the index increase from the end of the tax year in which it was created
until the end of the tax year in which it was set off.



Article Two: Times for Payment of Tax

Payment on submission of return
182. (a) When a body of persons submits a return under section 131 or an
estimative return under section 133, it shall pay the amount of tax due
from it according to that return.
(b) The Minister of Finance may prescribe, by Order, in respect of other
assessees except for individuals at least 75% of whose income is
chargeable income under section 2, paragraphs (2) or (5) that the
assessee to whom that Order applies shall, when he submits a return
under section 131 or an estimative return under section 133, pay the
amount of tax due from him according to that return.

Payment after notice of assessment 227
183. If a notice of assessment under section 149 was delivered to a person, then
he shall, within 15 days after delivery of the notice of assessment, pay the
balance of tax due from him under it, and if he filed objection under section
150 the balance of tax that is not in dispute.

Payment after objection
184. If an amended notice of assessment under section 152(a) or an Order under
section 152(b) was delivered to a person, then he shall within 15 days after
delivery of the notice or Order pay the balance of tax due from him under it,
and if he filed objection under section 153 the balance of tax that is not in
dispute.



Article Three: Interest and Fines

Adjustment of payment after judgment
185. If the decision of a District Court under section 156 or a decision of the
Supreme Court under section 157 was delivered to a person, then the
following provisions shall apply:
(1) if the assessee paid too much, then the excess amount shall be
refunded to him, plus interest and linkage differentials, within their
meaning in section 159A(a);
(2) if the assessee paid too little, then the balance shall be paid within
fifteen days after the decision is delivered, plus linkage differentials and
interest as aforesaid for the period from the day the appeal was filed
until judgment was given, unless the Court prescribed otherwise.

Interest on postponement of times of payment
186. The Assessing Officer may, if shown sufficient reason therefor, extend the
times prescribed under Article Two for the payment of all or of part of the tax,
or the times for payment of all or of part of the advance under Article One, for
a period he deems appropriate, on condition that the assessee pay linkage
differentials and interest, within their meaning in section 159A(a), for the
period of postponement.

Payment of interest and linkage differentials
187. (a) (1) In respect of amounts of tax for a certain tax year which were not
paid by the end of that tax year the assessee shall be charged
linkage differentials and interest, within their meaning in section
159A(a) for the period from the end of the tax year until the date
of payment; for a person with a special assessment period the
end of the special assessment period shall, for this purpose, take
the place of the end of the tax year.
(2) The provisions of this subsection shall also apply to tax debts
under section 159A(c).
(b) The provisions of subsection (a) shall not apply to a period, in respect
of which linkage differentials and interest are owed under sections
185(2) or 186.
(c) (1) In respect of amounts of tax that should have been deducted, but
were not deducted, or were deducted, but not transferred to the
Assessing Officer at the time prescribed therefor, the person
obligated to make the deduction shall be charged linkage
differentials and interest, within their meaning in section 159A(a), 228
for the period that begins on the fourteenth of the month before
the day on which he should have, but did not transfer the
amounts deducted, or on which he should have transferred, if he
had deducted them on time, and until their transfer to the
Assessing Officer; however, if the amount liable to deduction
does not relate to a specific date and therefore is determined as
a total for a certain period, then linkage differentials and interest
shall be charged for the period that began in the middle of the
said period.
(2) If the person required to make the deduction proves that the
person, from whose income he should have deducted the
amounts that were not deducted, included the said amounts in a
return of his income, then the date on which the amounts should
have been transferred to the Assessing Officer shall be replaced
by the expiration of the tax year to which the said return relates.
(d) If advances in respect of excess expenditure should have been paid
under section 181B and were not paid to the Assessing Officer on the
prescribed date and if had they been paid on time they could not
have been set off against advances paid or tax paid in respect of that
tax year, then the debtor shall be charged linkage differentials and
interest within their meaning in section 159A(a) for the period from the
end of the tax year until the day of payment.

Incentive for early filing of return and payment
187A. (a) If an assessee paid any amount on account of tax due from him in
respect of a certain tax year before the last date set in section 132 for
submitting the return under section 131, then in respect of that amount
he is entitled to exemption from linkage differentials and interest
applicable thereto under section 187(a), as specified below:
(1) on an amount paid until the end of the first month after the end of
the tax year or special assessment period (hereafter in this
section tax year) full exemption from linkage differentials and
interest;
(2) on an amount paid during the second month after the end of the
tax year exemption from half the linkage differentials and
interest;
(3) on an amount paid during the third month after the end of the tax
year exemption from one fourth the linkage differentials and
interest.
(a1) The Minister of Finance may, by Order, increase the rates of exemption
said in subsection (a);
(b) The relief under subsection (a) shall be computed first, and the relief
under the closing passage of section 187(a)(1) shall be deducted from
the balance of the linkage differentials and interest.
(c) Repealed

Fine for non-submission of return
188. (a) If a person did not submit a return by the date set in section 132, then
for each month of delay a fine of NS 200 shall be imposed on him;
however, if a later date for the submission of the return was set for that
person under section 133 (hereafter: delayed date), and if that person
did not submit the return by the delayed date, then a fine of NS 400
shall be imposed on him for each month of delay after the delayed date.
(a1) If, in a return he submitted under section 131, a person did not specify 229
an act designated under the said section as tax planning that must be
reported, then the Assessing Officer may impose on him a fine of NS
500 for every month in which he did not report as aforesaid.
(b) Repealed
(c) If a person did not submit a return at the time set in sections 161 or
171, then the Assessing Officer may impose on him a fine of NS 200
for each month of delay.
(d) If a person did not submit on time any of the returns prescribed for the
purposes of sections 164 to 166, then a fine of NS 200 shall be
imposed on him for each month of delay.
(e) In this section, "month" a whole month.
(f) If a person, required to deduct tax at the source from amounts paid by
him. does not at the prescribed time give to persons from whose
payments tax was deducted the forms that certify the amounts paid to
them and the tax deducted, then the Assessing Officer may impose on
him a fine of NS 100 in respect of every person to whom the form was
not delivered.
(g) If a person did not submit on time a return under section 135(1), then a
fine of NS 200 shall be imposed on him for each month of delay;
however, if a date was initially set for delivery by that person of a return
under section 135(1), and if subsequently on that person's application a
later date was set for submission of the return (hereafter: delayed date),
and if that person submitted the return after the delayed date, then a
fine of NS 400 shall be imposed on him for each month of delay after
the delayed date;
(h) The amounts stated in this section, as they were on January 1 of the
preceding tax year, shall be adjusted on January 1 of every tax year, at
the rate of index increase during the preceding tax year; if income
ceilings were adjusted in any month under section 120B(b), then the
Director may adjust the amounts said in this section, as they were on
January 1 of that tax year, as if they were income ceilings.
(i) Repealed

Saving of criminal responsibility
189. (a) The payment of a fine under section 188 or the increase of tax rates
under section 191B shall not derogate from a person's criminal
responsibility under this Ordinance.
(b) If criminal action was brought against a person for non-submission of a
return, then he shall not be charged a fine under section 188 for that
offense, and if he has paid an aforesaid fine, then it shall be refunded
to him; if a said criminal action was brought and the defendant was
acquitted, then linkage differentials and interest, within their meaning in
section 159A(a), shall be paid him from the day of the payment of the
fine until its refund.

Fine for delay in payment
190. (a) (1) (a) If a person is more than seven days late in paying an
advance which he must pay, or in paying part of it, then to
the amount in arrears shall be added a fine in the amount
of linkage differentials and interest within their meaning in
section 159A(a) (hereafter: linkage differentials and
interest), from the day set for the payment until the payment
of the amount in arrears, or until the end of the tax year in
respect of which the advance was required, whichever is 230
earlier (hereafter: end of period of fine).
(b) To a fine said in subparagraph (a) shall be added linkage
differentials and interest from the end of period of the fine
until the payment of the fine, and the fine shall be treated
like a tax debt for purposes of section 195A.
(c) Notwithstanding the provisions of subparagraph (a), if the
date for the payment of an advance was postponed under
section 175(f) and if a person paid an advance more than
four days later than the date prescribed in section 175(a) or
than the date prescribed under section 175(b), and if he did
not pay the advance by the determining date set in section
175(f), then the fine shall be added to the amount in arrears
in accordance with the provisions of subparagraph (a).
(d) If a person did not state the date for the payment of the
advance, and if therefore the advance was set at a total
amount for the entire period, then for calculation of the
fine under this section the date for payment shall be
deemed to be at the midpoint of the period in respect of
which the advance was set.
(2) If a person requested that the amount of his advance payments
be reduced and it appears that the tax due according to the
return filed by him exceeds the balance of advance payments
after the reduction, then he shall pay on the amount of the
reduction but not on more than the difference between the tax
due according to the return and the balance of the advance
payments after reduction linkage differentials and interest within
their meaning in section 159A(a) from the middle of the tax year
or special assessment period until the end of the tax year or
special assessment period or, in respect of each payment, until
the date of payment, whichever comes first; for this purpose, any
amount paid on account of advance payments shall first be
placed to the account of the advance.
(3) For the purpose of reducing the amount of advance payments in
a certain tax year, as said in paragraph (2), other than in respect
of participation in the financing of research and development
carried out by another person under section 20A(a) or under any
other statute, and other than in respect of credit for contributions
under section 46A or under any other statute, the tax from the
payment of which the assessee was exempted because of the
said deduction or credit shall not be taken into account in the
calculation of tax in accordance with the return.
(4) If an assessee failed to give notice of the beginning of business
activity or its change in accordance with section 134, and if he
consequently was not required to pay advances as said in section
181, or if consequently the amount of his advance payments was
not increased as said in section 180, then he shall be charged
linkage differentials and interest in respect of the determining
period, for the entire amount of advance payments which he
owed, or for the amount by which the Assessing Officer was
entitled to increase his advance payments, as the case may be;
for this purpose: "determining period" the period that begins in
the middle of the period between the opening of the business or
of its change and between the end of the tax year or the special
assessment period, and that ends at the end of the said year or 231
period, as the case may be.
(5) For purposes of paying linkage differentials and interest, and for
purposes of the order in which payments are credited under
section 195A, linkage differentials and interest under paragraphs
(2) to (4) shall be deemed a tax debt at the end of the tax year or
special assessment period, as the case may be.
(b) Repealed
(c) Repealed
(d) A fine imposed under this section shall not be deemed part of the tax
paid for purposes of claiming relief under any of the provisions of this
Ordinance.

Fine for unlawful set-off of deduction at the source
190A. If a person deducted from his advance payments a deduction at the source,
for which he does not have written certification or which was not deducted
during the period permitted under section 177, then he shall be liable to a fine
of three times the amount of the improper deduction.

Deficiency fine
191. (a) In this section, "deficiency" the amount by which the tax which an
assessee owes exceeds the tax payable by him according to his return
under section 131 or, if he has not submitted such a return, the amount
of tax determined under section 145(b), all as the case may be.
(b) If a deficiency of more than 50% of the tax to which he is liable was
found in respect of any assessee, and if he does not prove to the
Assessing Officer's satisfaction that he was not negligent in making the
return delivered by him or in the non-delivery of a return, then he shall
be liable to a fine at the rate of 15% of the amount of deficiency.
(c) If the Director or a person empowered by him for this matter has
reasonable grounds for believing that the deficiency was created
willfully and with the assessee's intent to evade payment of tax, then
double the fines specified in subsection (b) shall be added to the
amount of tax to which the assessee is liable.
(c1) If a final assessment that can no longer be appealed includes in
respect of an act which under section 131(g) was designated tax
planning that must be reported the determination that it must be
ignored under the provisions of section 86, then the assessee shall be
liable to a fine at the rate of 30% of the shortfall created by the said tax
planning; when a said fine is imposed, then no fine shall be imposed in
respect of that shortfall under the provisions of subsections (b) and (c).
(d) For purposes of sections 149 to 152, the addition of a deficiency fine
under this section shall be treated like an assessment.
(e) Linkage differentials and interest shall be added to a fine imposed
under subsections (b) or (c) after February 28, 1985, from the end of
the tax year in respect of which the return was submitted or the
assessment made under section 145(b), or from February 28, 1985,
whichever is later, and until the day the fine is paid, and the fine shall
be deemed a type of debit charge for the purposes of section 195A.

Fines for failure to deduct
191A. If a person without reasonable justification fails to deduct tax which he is
required to deduct under section 161, 164 or 170, then he shall be liable to a
fine at the rate of 15% of the amounts which he did not deduct.
232
Increase of tax rates for not keeping books
191B. (a) If an assessee is required to keep account books for a certain tax year
or part of it and did not keep them, or he kept them only during part of
the period during which he was obligated to keep them, or if he did not
base his return on account books, then the tax to which he is liable for
that year shall be increased by 10% of the amount of the chargeable
income in respect of which he was required to keep accounts, and in
every subsequent year in which he does not keep account books as
aforesaid the tax shall be increased by 20% of the amount of the
aforesaid income; however, if a person was first required to keep books
in a certain tax year, but first began to do so after the date on which he
was required to begin, then the said additions shall only apply to the
period during which he was required to keep books and did not do so.
(b) If an assessee was charged an addition to tax for a certain tax year,
then the advance payments for the year during which the assessment
for that certain tax year is made shall be increased by 20%, if the
addition to the tax is 10%, and by 40% if the addition to the tax is 20%,
but if the tax was also increased for the tax year according to which the
advance payments were fixed, then the rate of increase of the advance
payment shall be reduced by twice the rate of addition to the tax; this
provision shall not apply if the assessee proves, to the Assessing
Officer's satisfaction, that in the tax year in which the aforesaid
assessment was made he kept account books or was not required to
keep them.

Fine for false record
191C. If an assessee is required under directions from the Director by virtue of
section 130 to record identifying particulars of a purchaser who pays cash,
based on a document produced by him, and if he does not record them or
records incorrect particulars, then a fine of 5% of the amount of the sale in
respect of which he violated a said direction shall be imposed on him, or a
fine of NS 12,900, whichever is more.

Director's authority to decrease interest or fine
192. The Director may reduce the rate of interest or of linkage differentials and
interest under sections 186, 187 and 190, and the amount of fine under
sections 188, 190, 190A, 191A and 191C, or waive them completely, if it is
proved to his satisfaction that the delay which caused the liability to pay was
not caused by any act or omission that depended on the assessee's will; the
Director may, at his absolute discretion, reduce or waive as aforesaid, if it is
proven to his satisfaction that the assessee did not know the exact amount of
tax due from him before he filed the return; however, the Director may not
reduce the amount of interest or linkage differentials and interest under
sections 186, 187 and 190 only because the assessee duly made his
advance payments or because tax was duly deducted from him or he paid the
tax due from him in accordance with his return when he submitted it.

Time for paying interest, linkage differentials or fine
192A. The time for the payment of interest, linkage differentials and interest or fines,
which the assessee must pay under the provisions of this Ordinance, shall be
within 30 days after he was sent notification of that obligation.


233
Article Four: Enforcing Payment

Assessing Officer may enforce payment
193. If a person is obligated to pay any amount under this Ordinance, then the
Assessing Officer may enforce its payment as provided hereafter or under the
Taxes (Collection) Ordinance, and the provisions of that Ordinance, except
for section 12 there, shall apply to the collection of any said amount as if it
were a tax, within its meaning in that Ordinance; however, when the
Assessing Officer is not the District Officer, then the Assessing Officer shall
forward to the District Officer of the district in which the assessee resides or
carries on his business a certificate signed by the Assessing Officer that
specifies the amount of arrears due from the assessee, and upon receipt of
that certificate the District Officer shall enforce payment under the provisions
of the Taxes (Collection) Ordinance that apply to the collection of a said
amount.

Collection of tax in special cases
194. (a) If the Assessing Officer has reason to suspect that the tax on a certain
income will not be collected because a certain person intends to leave
Israel, or because of any other reason, then he may
(1) if that person already was assessed in respect of that income or
is under obligation to make advance payments on it demand by
written notice that that person immediately provide collateral, to
the Assessing Officer's satisfaction, for payment of the tax
assessed or of the advance payments he must make;
(2) if that person has not yet been assessed as aforesaid assess
him according to the amount of income of which a return was
made or, if that person has not made a return or has made a
return which does not satisfy the Assessing Officer, in an amount
which the Assessing Officer deems reasonable;
(3) if that person is not yet obligated to make a return of that income
require him by written notification to prepare a return
immediately, and thereafter the Assessing Officer may act as said
in paragraph (2).
(b) If an assessment was made under subsection (a)(2), then the
Assessing Officer shall make notification of it, and all the tax assessed
under that assessment shall be paid immediately upon delivery of that
notification.
(c) If the assessee did not pay the tax or did not provide the collateral
according to subsection (a)(1), then the competent Court may, on the
Assessing Officer's application, make an Order even in the assessee's
absence
(1) to stay his departure from Israel;
(2) to attach his property.
(d) If an assessee paid the tax or provided collateral under this section,
then he is entitled to file objection and appeal under sections 150 to
158, and the amount paid by him shall be corrected according to the
results.

Action by Assessing Officer
195. An action may be brought by the Assessing Officer in his official capacity for
tax and all costs, and it may be recovered in a competent Court from the
person who owes it, as if it were a debt to the Government of Israel, and it
may be sued for and recovered by the means prescribed in section 193. 234



Article Five: Crediting an Assessee's Payments

Crediting payments
195A.(a) When a person pays any amount on account of a tax debt, a
proportional part of the amount paid shall be credited against each type
of debit in that tax debt, in the proportion of that type of debit to the
entire tax debt; in this context:
(1) if the person did not specify the amount paid as being on account
of his debt as assessee or as deductor, the amount shall be
credited against his debt as deductor;
(2) a tax refund, which under the Tax Set Off Law 5740-1980 is set
off against a tax debt, and an amount collected under the Taxes
(Collection) Ordinance or in any other way shall be treated like an
amount paid by that person.
(b) (1) If a person paid an amount on account of a tax debt which he
owes as an assessee, without specifying the year of the debt,
then the amount shall be credited against his tax debts as
assessee according to the years in which they were created,
beginning with the earliest tax year;
(2) if a person paid an amount on account of a tax debt he owes as a
deductor, then the amount shall be credited against his tax debts
as deductor in the order in which they were created, beginning
with the earliest one.
(c) In this section
"tax debt" each of the following:
(1) the total amount of all types of debits owed by a person under
this Ordinance, as assessee for a certain tax year;
(2) the total of amounts of all types of debits owed by a person under
this Ordinance as deductor, in respect of any payment which he
paid to another person;
"type of debit" each of the following: tax, interest, linkage
differentials.



Article Six: Monetary Composition in Respect of
Online Returns

Monetary composition
195B. Notwithstanding the provisions of Article Three, if the Director has reasonable
grounds to assume that an online return was not submitted up to the date
said in section 132 or 166, as the case may be (in this Article: violation), then
he may impose a monetary composition on the violator in the amount
specified below in respect of each whole month of delay in submitting the
return;
(1) if an individual did not submit an online independent return under
section 131(b2) NS 1,000;
(2) if an employer did not submit and employer's online return or if a
deductor did not submit a deductor's online return NS 1,500.

Demand for monetary composition and its payment
195C. Monetary composition for a violation under section 195B shall be paid at the 235
Director's demand on a form he prescribed (hereafter: payment notice) within
thirty days after the payment notice was dispatched; the payment notice shall
specify, inter alia, particulars of the violation for which the monetary
composition was imposed and its amount, and it shall also include information
on the right to present arguments to the Director, as said in section 195D.

Writ of arguments
195D. (a) An individual, an employer or a deductor to whom a payment notice
was sent may, within thirty days after dispatch of the said notice, submit
his written arguments on imposition of the composition and its amount
to the Director in writing (in this section: writ of arguments); to the writ of
arguments shall be attached an affidavit in support of the facts
specified in it.
(b) When an individual, employer or deductor has submitted a writ of
arguments to the Director, then the Director shall decide on the basis of
the writ of arguments and of the affidavit whether to leave the payment
notice in effect or cancel it, and he may in order to reach the said
decision summon the person who submitted the writ of arguments to
a hearing before him; a notice of the Director's decision under this
subsection shall be sent to the person who submitted the writ of
arguments.
(c) Submitting the writ of arguments under this section shall not stay
payment of the monetary composition at the time said in section 195C.
(d) If the monetary composition was paid and the Director decided under
this section to cancel the payment notice, then the monetary
composition shall be refunded with linkage differentials and interest
within their meaning in the Interest and Linkage Adjudication Law 5721-
1961 (in this Article: the Interest Adjudication Law) from the day of its
payment until the day of its refund.

Updating the amount of monetary composition
195E. (a) Monetary composition shall be at its updated amount on the day the
payment notice is dispatched, and if a petition was brought and the
Court that heard the petition ordered its payment to be stayed at its
updated amount on the day of the decision on the petition.
(b) The amount of monetary composition shall be updated on January 1 of
each year (in this section: the updating day) at the rate of increase of
the index known on the updating day over the index that was known on
the updating day of the preceding year, and in respect of the first
updating day over the index that was known on January 1, 2008; the
said amount shall be rounded to the nearest amount that is a multiple
of NS 10.
(c) The Director shall publish the updated amount of the monetary
composition in a notice in Reshumot.

Linkage differentials and interest
195F. If monetary composition was not paid on time, then linkage differentials and
interest shall be added to it, within their meaning in the Interest Adjudication
Law, for the arrears period up to its payment (in this Article: arrears
supplement).

Collection
195G. The Taxes (Collection) Ordinance shall apply to collection of the monetary
composition and of the arrears supplement. 236

Reserving criminal liability
195H. (a) Payment of monetary composition shall not derogate from the
individual's, employer's or deductor's criminal liability for the violation.
(b) If an indictment under section 216(4) or (4a) was brought against an
individual, employer or deductor for a violation, then he shall not be
obligated to pay monetary compensation for it, and if he paid, then the
amount paid shall be refunded to him with the addition of linkage
differentials and interest, within their meaning in the Interest
Adjudication Law, from the day of its payment until the day of its refund.

Petitioning the Administrative Affairs Court
195I. (a) Petitioning the Administrative Affairs Court against the imposition of
monetary composition under this Article, in accordance with section
32(5) of the Administrative Affairs Courts Law 5760-2000, shall not stay
payment of the monetary composition, except with the Director's
consent or if the Court so ordered.
(b) If a petition said in subsection (a) was accepted after the monetary
composition was paid, then the monetary composition shall be
refunded with the addition of linkage differentials and interest, within
their meaning in the Interest Adjudication Law, from the day of its
payment until the day of its refund




CHAPTER THREE: DOUBLE TAXATION RELIEF

Article One: Reciprocal International Agreement

Order that gives effect to agreement
196. (a) When the Minister of Finance has given notice by Order, that an
agreement specified in the Order was concluded with a certain state to
afford double taxation relief on income tax and on every other tax of a
similar character imposed by the Laws of that state (hereafter:
reciprocating state) and that it is expedient to give that agreement effect
in Israel, then that agreement (hereafter: agreement) shall have effect
in relation to income tax, notwithstanding any provision of any statute.
(b) An Order made under this section may be revoked by a subsequent
Order.
(c) In this section, AState@ including areas outside Israel that are not a
State, enumerated in Schedule One AA1@.

Obligation of secrecy in case of agreement
197. When an agreement has been given effect as said in section 196, then the
obligation to maintain secrecy imposed by section 234 shall not prevent
disclosure to an authorized officer of the reciprocating state of any
information that is to be disclosed under the agreement.

Power to make regulations
198. The Minister of Finance may make regulations for implementation of the
provisions of an agreement.

237

Article Two: Determining Amount of Relief

Definitions
199. In this Chapter
"income tax" exclusive of companies tax;
"Israel taxes" income tax and companies tax;
"foreign taxes" taxes payable by an Israel resident to tax authorities of a
state other than Israel, on income produced or accrued in that state, including
taxes payable to states that are parts of a federal state or to regional
authorities that are parts of that state, calculated as percentages of the
income and exclusive of municipal taxes;
"foreign income" income produced or accrued abroad;
"foreign income from a certain source" foreign income, classified by the
sources of income prescribed in section 2, in Part Five or in Part Five "C",
less expenses that may be deducted from them and losses that may be set
off against them, all in accordance with the provisions of the Ordinance.

Provisions on crediting double taxation
200. (a) Foreign taxes paid on foreign income that is chargeable to tax in Israel,
shall translated into new shekel amounts be allowed as credits
against Israel taxes under this Ordinance, in accordance with the
provisions of this Article.
(b) Israel taxes shall be credited in a certain tax year only if the person
whose income is chargeable to those taxes was an Israel resident in
that tax year.
(c) The Director may prescribe rules for the implementation of this Article
and rules on the matter of returns.

Deduction of foreign taxes
201. (a) Foreign taxes paid in respect of foreign income that is tax exempt in
Israel shall not be deducted.
(b) The relief granted in respect of dividends under section 163 shall be
deemed a reduction of the amount of tax which applies to that dividend
under the Ordinance.

Credit against companies tax precedes credit against income tax
202. If an agreement permits credit against companies tax and income tax, then
the amount of credit shall be used first to reduce companies tax on that
income and to the extent that all of it cannot be used for that purpose it
shall be used to reduce income tax on it; if the agreement allows credit only
against income tax, then section 201 shall be construed as if it said "income
tax" instead of "Israel taxes".

Amount of credit against companies tax
203. (a) The amount of credit against companies tax, to which an Israel resident
body of persons is entitled under the provisions of this Article in respect
of foreign income from a certain source shall not exceed the amount of
companies tax to which it is liable on that income.
(b) If the foreign income includes dividends, in respect of which the
assessee company, as defined in section 126(c), requested that it pay
tax at the rate prescribed in section 126(a), or if under an agreement
to prevent double taxation the foreign taxes paid on that dividend and
which were not imposed directly must be taken into account as credits, 238
then the grossed up dividend shall be added to all of the company's
income and credit shall be given in the amount of the foreign taxes that
were not imposed directly on that dividend, in addition to the foreign
taxes; the total credit in this section shall not exceed the amount of tax
that applies to the said dividend.
(c) In this section
"foreign taxes not imposed directly" taxes paid by a foreign
resident body of persons on income which, after the payment of tax,
was distributed as a dividend;
"grossed up dividend" the amount of income from a dividend
received after tax was deducted at the source, plus the tax deducted at
the source, plus foreign taxes not imposed directly.

Amount of credit against income tax
204. (a) The amount of credit against income tax to which an Israel resident
individual is entitled under the provisions of this Article in respect of
foreign income from a certain source, which is ordinary income, shall
not exceed the credit ceiling in respect of that income.
(b) The amount of credit against income tax to which an Israel resident
individual is entitled under the provisions of this Article on foreign
income from a certain source, which is chargeable to tax at a special
rate, shall not exceed the amount of tax that applies to that income in
Israel.
(c) In this section
"ordinary income" chargeable income, on which no special tax rate
is imposed;
"income ratio" the ratio obtained by dividing the amount of foreign
income from a certain source that is ordinary income, by the total
amount of ordinary income;
"special tax rate" a tax rate that applies in Israel and is different from
the tax rate prescribed in section 121;
"credit ceiling" the amount obtained by multiplying the income ratio
by the amount of income tax on the individual's total ordinary income
before any credit under this Article was granted.

205. Repealed

Excess credit in a tax year
205A. (a) If the amount of foreign taxes paid in respect of foreign income from a
certain source exceeds the amount of credit granted in its respect
against Israel taxes (in this section: excess credit), then the assessee is
entitled to subtract the excess credit from tax to which he will be liable
in respect of income produced abroad from the same source in the
following five years, one after the other, adjusted at the rate of the index
increase from the end of the tax year in which it was created to the end
of the tax year in which it was subtracted; the excess credit shall be
subtracted in accordance with this section, subject to the provisions of
this Chapter, mutatis mutandis.
(b) Notwithstanding the provisions of subsection (a), if an excess credit
was created because of the set off of a loss that stems from foreign
income from a certain source against foreign income from another
certain source, then in the five coming years, one after the other, it may
also be subtracted from the tax on foreign income from the source from
which the said loss stems, adjusted as said in that subsection.
239
Rules for computing income for purposes of credit
206. When calculating foreign income that is chargeable to tax in Israel, no
deduction from it shall be allowed in respect of foreign taxes.

Credit for tax on dividend in special cases
207. If the agreement provides, in respect of certain categories of dividends, but
not in respect of others, that foreign taxes not imposed on them directly or by
deduction are to be taken into account for purposes of credit against Israel
taxes on them, and if a dividend paid is not of the said specific categories,
then if the dividend was paid to a company which directly or indirectly
controls at least half the voting power in the company that pays the dividend
the credit shall be allowed as if the dividend belonged to one of those specific
categories.

Credit for dividend
207A. (a) If an Israel resident body of persons received a dividend from a body of
persons, which is considered an Israel resident only because its
business is controlled and managed from Israel (in this section the
other body) and if tax from the dividend was deducted at the source in
the foreign state, then the other body shall be entitled to credit in the
amount of the tax deducted at the source as aforesaid, against the
companies tax that applies to it; the amount of the credit shall not
exceed the companies tax that applies in that tax year, but an unused
balance of the credit may be used against companies tax that will be
imposed on the other body in the following five years, one after the
other.
(b) If an Israel resident individual received a dividend from the other body
and tax at the source was deducted in the foreign state, then the
individual shall be entitled to a credit in the amount of tax deducted at
the source, against the tax that applies to his income from the said
dividend, all subject to the provisions of this Chapter.

Credit for foreign taxes
207B. Foreign tax can be credited against Israel tax that applies in a tax year only if
it was paid in the foreign state no later than 24 months after the end of that
tax year, except for tax that was supposed to be paid on unpaid profits, as
defined in section 75B; foreign tax paid in the foreign state after the said
period may be deducted in the tax year in which it was paid in the foreign
state, against tax due in Israel on foreign income from the same source, and
the provisions of this Chapter shall apply to it, mutatis mutandis; in the case of
disagreement on the amount of the credit, the applicant for the credit has the
right of objection and appeal, as said in sections 150 and 153, as part of an
objection and appeal against the assessment made for him.

Credit for foreign taxes employee of a certain employer
207C. If an individual has income, the place of production of which is in Israel only
because of the provisions of section 4A(b)(1), then for purpose of the
provisions of this Article the individual's income shall be deemed foreign
income and the taxes paid to tax authorities in the foreign state in respect of
that income shall be deemed foreign tax.

Restriction on credit
207D. When a loss from a controlled business has been set off against income in
Israel, as said in section 29(2)(c) or (e), then no credit shall be given under 240
this Chapter against Israel taxes, to which the Israel resident is liable in
respect of chargeable income he had from a business abroad during the two
years before the tax year in which the loss was set off and in the five years
thereafter, one after the other, up to the amount of the loss set off as
aforesaid.

Waiver of credit
208. Credit against Israel taxes to which a person is liable in a tax year shall not be
allowed, if he requested that no credit be given against his income in that
year; if he so requested, then the provisions of section 205A shall not apply.

209. Repealed

Error in calculating credit
210. If the amount of credit is found to have been set too high or too low, in
consequence of a change in the amount of tax payable in Israel or abroad or
because of the provisions of section 207D, then no provision of any statute
that limits the time for making assessments or claims for relief shall apply to
an assessment or claim to which the change gave rise, if it was made not
later than two years after the assessments, changes and other decisions in
Israel or abroad which matter in respect of the question whether any credit
is to be given and what it shall be.



Article Three: Miscellaneous Provisions

Definitions
211. In this Article
"double taxation relief" any credit for income tax abroad, allowed for
purposes of income tax under this Ordinance, including any credit or relief
taken into account in determining the net Israel rate to be levied on dividends
received;
"rate of relief" the rate, which is the rate of the excess tax deducted from
the dividend, over the net Israel rate.

Effect of relief on set off and refund
212. When the tax payable by a company is affected by double taxation relief, then
the amount to be set off under section 163 or to be refunded under section
160 in respect of the tax deducted by the company from any dividend paid by
it shall be reduced according to the following rules:
(1) If the recipient of the dividend is not liable to tax on it, then the
reduction shall be in an amount equal to the tax on the grossed up
dividend, at the rate of relief applicable to it;
(2) if the rate of tax to which the recipient is liable in respect of the dividend
is less than the rate of relief applicable to it, then the reduction shall be
in an amount equal to the tax on the grossed up dividend, calculated at
the difference between those two rates.

Place of dividend in scale of income
213. For purposes of section 212:
(1) if the income includes one dividend said in section 212, then it shall be
deemed to be in the highest bracket of the income;
(2) if the income includes several aforesaid dividends, then any dividend, 241
the net Israel rate of which is lower than that of another dividend shall
be deemed to be in a higher bracket in the scale of income;
(3) if tax a dividend is chargeable at different rates on its different parts, or
if the tax is chargeable on one part of a dividend and not on another
part of it, then each part shall be treated like a separate dividend.

Double taxation relief on a resident's foreign income
214. (a) In respect of an Israel resident's income, the source of which is abroad
and on which income tax or a similar tax is charged at its source, the
Minister of Finance may, by Order, grant double taxation relief by
exempting the income from paying all or part of the tax, as shall be
specified in the Order.
(b) The provisions of this section shall not derogate from the powers under
section 196.