The Israeli Tax Authority position regarding the "Control and Management" test

The Israeli Tax Authority position regarding the "Control and Management" test

The Israeli Tax Authority position regarding the "control and management" test can be found in a special Circular (hereinafter: the Circular). According to the Israeli Tax Authority "control and management" means the ability to effectively decide, influence the conduct of a business and give binding instructions of decisive effect.

The expression "control and management" contains two terms - "control" and "management" - but the two terms are incorporated and combined into one integrated concept (not all practitioners share this view). The Circular states that the formal legal ownership of a business does not on its own prove the existence of control and management, nor is the place of shareholders meetings generally conclusive. What matters is the ability to effectively decide, influence the conduct of a business and give binding instructions of decisive effect.

It is necessary to review:

Who in practice is empowered to exercise control and management of the company or business;

Where is business policy determined; and

Where are major strategic decisions taken.

Where in practice are decisions taken that enable the business to be conducted

For these purposes, such decisions are material core decisions taken at the level of senior management. Each case should be reviewed on the basis of its facts.

In general the decision making process should be reviewed:

From where does the need for a particular decision originate

Where are all the alternatives checked and preparatory work done

Where are professional personnel consulted

Where is the final decision formulated

The place where the board of directors convenes may not be conclusive given modern means of communications.

A number of factors may indicate actions requiring decisions at the strategic management level. It is necessary to review, among others, where the following are decided:

Major transactions that may impact the company's future (e.g. a merger)

Finance of operations and specific transactions, especially those requiring a guarantee

Major investments

The person or body authorized to exercise control and management in practice may be:

The board of directors, or

Specific people if they are delegated broad authority and discretion to decide and responsibility for failure. In this regard, the Israeli tax authorities may review board resolutions and any management agreements or powers of attorney.

The Circular sets forth a number of additional supporting indicators of where control and management are exercised, including:

Where day-to-day operational decisions are taken - but precedence should be given to where material strategic decisions are taken, if different,

Where the books are maintained

Where most major business contacts are located

Where new contracts are entered into

Where telephone calls are made

Postal address

Where administration is conducted and books are stored

POST COMMENT

The Advantages of Linking Management Systems - Webinar By GlobalCompliancePanel Epc Rfid Gen 2 Label For Supply Chain Management Problems In The Management Of Agricultural License Plate And Countermeasures - Farm Machinery, Project Management From Maharashtra Institute Of Technology, Pune Supply Chain Management From Maharashtra Institute Of Technology, Pune Implementing Change Management And Dealing With Resistance Hnwi In Indian Wealth Management Industry - Trends, Analysis And Forecast (2010-2015) Debt Management Today: Time To Sail Against The Wind Which Debt Management Solution Is Best For You? Debt Management Services - A One-stop Solution To Be Debt-free Key Trends In Supply Chain Management How Does Moodle Differ from Other Learning Management Systems (LMS)? 3 Secrets of Time Management to Unlock Your Potential