The Minister of Finance Signs Orders Giving Effect to Conventions for the Avoidance of Double Taxation with Georgia and Denmark
The Minister of Finance, Dr. Yuval Steinitz, has signed orders giving effect to conventions for the avoidance of double taxation betweenIsrael andGeorgia and betweenIsrael andDenmark. The conventions go into force today, January 1, 2012, and will apply to income derived in the 2012 tax year and onward and to taxes withheld at source from amounts paid in 2012 and onward.
The conventions are substantially based on the OECD Model Convention and, inter alia, set the following tax withholding rates in the originating state:
- Interest – Withholding tax on interest is limited to a rate of 5%.
- Dividends – Zero tax is deducted in the originating country, if the dividend recipient holds at least 10% of the company paying the dividend or if the dividend recipient is a pension fund. In every other case, withholding tax on dividends is limited to 5%.
- Royalties – The principle established in the OECD Model Convention has been adopted, according to which royalties are exempt from tax in the originating state.
- Capital gains – The principle established in the OECD Model Convention has been adopted, according to which an exemption is granted from capital gains tax in the originating state, except on the sale of immovable property or the sale of shares of a company that derives more than 50% of its value from immovable property
A construction or installation project is deemed to be a permanent establishment liable to tax in the country in which it is situated, only if it lasts more than nine months, under the convention betweenIsraelandGeorgia, and twelve months, under the convention betweenIsraelandDenmark.
Based on the OECD Model Convention, the conventions withGeorgiaandDenmarkinclude, among others, articles dealing with the avoidance of double taxation, nondiscrimination, a mutual agreement procedure between the competent authorities of the two contracting states, and the exchange of information.
Below are links to the text of the conventions on the website of the State Revenue Administration in the Ministry of Finance:
