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Client Updates

Dec 11, 2019

Special Client Update | New Revolutionary District Court Decision on Change of Business Model and FAR Transfers

On December 9, 2019, a District Court judgment was rendered which could have dramatic implications on M&A transactions involving Israeli target companies. The judgment concludes that matters pertaining to "business model changes" in Israeli target companies acquired by foreign entities are transfer pricing matters and no presumption should be drawn whereby in every "business model change" case, there is a sale of functions, assets or risks (FARs).

The judgment is in direct contrast to the practice of the Israel Tax Authority (ITA), including as reflected in circulars the ITA published on this issue, and its position in audits of Israeli target companies acquired by non-Israeli entities as well as in court hearings.

In this client update, we briefly present the facts behind the judgment, the important rulings of the court, and the potential implications the judgment may have. 

For the full read, please click here>>

Our firm has extensive experience in dealing with FAR transfer issues, both during the acquisition structuring stage and later stages of tax audits and court proceedings, as well as with respect to the transfer pricing aspects involved.

Our firm is the only law firm that has an integral autonomous transfer pricing department, that, among other things, can provide transfer pricing studies. We recommend contacting us for purposes of analyzing the implications of the judgment, including for considering the possibility of cancelling tax provisions.