Introduction
On 4
May 2014 an inter-ministerial committee was set up to promote the establishment
of publicly traded funds for investment in infrastructure. The committee was
formed to examine and recommend measures and actions that would encourage the
establishment of traded infrastructure funds in order to:
To
that end, the committee has recommended certain tax benefits and restrictions
as outlined below.(1)
Founders
and investors should consult with an Israeli tax specialist when contemplating
the formation of, or investment in, such traded infrastructure funds.
Tax
and corporate governance model
The
committee generally recommends adopting a real estate investment trust
(REIT)-based model, whereby there is only one level of taxation: taxation of
the fund's shareholders – notwithstanding the fact that the fund will be formed
as an Israeli corporation. However, the classification and calculation of the
fund's income will be determined at the fund's level. The proposed corporate
governance model of the fund is also based on the REIT model (ie, for a fund
with no controlling shareholder, applying the 'five or fewer' rule, which
limits the aggregate holdings of the five largest shareholders to less than
50%).
Pension
funds and non-Israeli investors
The
committee has proposed to generally exempt pension funds from their fund's
income, regardless of the nature and classification of such income by the fund.
With respect to non-Israeli investors, it proposes that ongoing income from the
fund will be subject to tax in Israel, but will not create filing obligations.
Assets contribution in
exchange for fund's shares
The
committee has proposed that, in general, a contribution of assets to the fund
in exchange for the fund's shares will benefit the fund with a reduced purchase
tax rate and the contributor with a deferral in respect of its capital gains.
Offsetting tax losses and
foreign tax credits
Certain
restrictions have been proposed with respect to offsetting the fund's losses
and with respect to foreign tax credits.
For
further information on this topic please contact Anat
Shavit or Yuval
Peled at Fischer Behar Chen Well Orion & Co by email (ashavit@fbclawyers.com
or ypeled@fbclawyers.com).
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·
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