Overseas Companies, part 5 – Form 150
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As part of the disclosures required in the tax return, anyone who is considered a controlling shareholder in a non-Israeli company must complete form 150, and attach it to the tax return.
A controlling shareholder is someone who, directly or indirectly, owns at least 10% of the rights of the company (e.g. shares, voting rights etc.). Furthermore, in determining the percentage of ownership, the percentages owned by first-degree relatives are also taken into account.
The purpose of the form is to inform the tax authority of the existence of the company, as well as the approach that has been taken in terms of tax treatment in Israel. The information is of course designed to allow the tax authorities to make their own assessment, and potentially disagree with the approach.
The form has room for details of 2 companies. Of course, if there are more companies, extra forms should be completed.
The first part of the form contains some basic details of the company – name (Hebrew and original language), registration number and the country in which the company was incorporated.
The next question relates to the country of residence of the country, which could be different to the country in which the company was incorporated. This relates back to the issue of “control and management” of the company – see here for more.
The next question relates to the office (registered) address of the company, and then the form asks for the date that the shareholder acquired their share(s) in the company.
The following questions asks whether the income of the company is treated – for tax purposes in the country of residence of the company – as see-through to the shareholders (e.g. the LLC in USA – see here for more), or “regular,” i.e. belonging to the company itself. If the former, an election can be made in Israel to treat the income in a similar fashion.
The next question relates to the correspondence address of the company, followed by email address and telephone & fax numbers. The final question in this section relates to an identity number given by the Israeli authorities to this company.
The bottom set of questions relate primarily to the activities of the company.
The first question asks for a short description of the business activity of the company.
The next two questions ask whether the majority of the income of the company is derived from passive income (e.g. interest, dividends, rental etc.), and – if so – whether the company meets the definition of a Controlled Foreign Company.
The following two questions deal with whether the majority of the income of the company is derived from a “Special Profession”, and – if so – whether the company meets the definition of a Foreign Professional Company.
The next question asks whether the shares of the company are publically traded, and the final question asks whether there are any persons who manage the company or a directors of the company who are Israeli residents. This of course gives rise to the question of the company being “controlled and managed” from Israel, with all of the potential repercussions.
The bottom section of the form requests information regarding the percentage holding of the tax payer – both ordinary shares and other rights, according to various rights that the shares/rights will give them (profits, votes etc.). The percentages requested are the year-end percentages, and the highest during the tax year.
This is an extremely important form to get right, and if in doubt – I strongly recommend asking a professional for assistance.