preface

120
TAXATION
8.2.4.3. Tax exemption prior to 2009 amendment
In addition, prior to the 2009 Amendment, a temporary order
prescribed that residents of a treaty country were exempt from
capital gains tax if they met certain conditions (i.e. being
residents of a treaty country for a 10-year period at least), on the
sale of Israeli non-tradable securities, or of foreign securities the
main assets of which are located in Israel. The exemption is
limited to securities purchased between July 1, 2005 and
December 31, 2008, and is subject to certain requirements.
According to another version of the Amendment, all new
residents (not necessarily those of a reciprocating country for the
exemption) will be exempt from capital gains tax in the treaty
country.
The exemption will not apply to the sale of securities of a
company, the majority of whose assets, at the time of purchase
and for the two years preceding the sale thereof, were comprised
of real estate and/or real estate companies.
8.3. CAPITAL GAINS TAX
8.3.1. General
The term "capital gains" is defined as the excess of proceeds from the
sale of an asset over its depreciated cost. The Land Betterment Tax Law
and the Income Tax Ordinance deal with capital gains taxation. The
former deals with taxation of capital gains derived from the sale of real
estate in Israel and in the region, while the latter deals with capital gains
from all other sources.
8.3.1.1. Source of Generating or Deriving Capital Gains Under
Domestic Rules.
The source of generating or deriving capital gains will be
deemed to be Israel if:
(a) The asset sold is located in Israel.
(b) The asset sold is located outside Israel and, in principle,
constitutes directly or indirectly a right to an asset or
inventory, or an indirect right to a property or asset in a real
BDO Israel