preface

BDO Israel
DOING BUSINESS IN ISRAEL
(d) The location of income generated from work will be the
location at which the work was performed.
(e) The location of income generated from interest, discounting
fees and linkage differentials will be the location of residency
of the payer.
(f) The location of income generated from rental fees or usage
fees in respect of an asset will be the location of the use of
the asset.
(g) The location of income generated from salary or
compensation, including royalties originating from intangible
assets, e.g. patent, intellectual property, etc. will be the
location of the residency of the payer.
(h) The location of income generated from pension funds,
benefits and annuities will be the location of the residency of
the payer.
(i) The location of income generated from agriculture will be the
location of the revenue-bearing asset.
(j) The location of income generated from a dividend will be the
location of the residency of the corporate entity paying the
dividend.
(k) There are a number of exceptions to the above rules, e.g.
income from interest, discounting fees and linkage
differentials, income originating from intangible assets
(including royalties), and income from pension funds,
benefits and annuities. In all such cases, the source of income
will be determined as follows:
In Israel - also when the payer is a foreign resident - if
payment constitutes an expense incurred by the foreign
resident’s permanent establishment in Israel.
Outside of Israel - also when the payer is an Israeli resident -
if payment constitutes an expense incurred by the Israeli
resident’s permanent establishment outside Israel.
All the above is subject to inapplicability of Treaty provisions.
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