𝐖𝐡𝐚𝐭 𝐢𝐬 𝐓𝐫𝐚𝐧𝐬𝐟𝐞𝐫 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 𝐚𝐧𝐝 𝐰𝐡𝐲 𝐬𝐡𝐨𝐮𝐥𝐝 𝐲𝐨𝐮 𝐜𝐚𝐫𝐞?
shares
And trust me, you should very much care.
If you own and operate a legal entity in Israel and abroad, you need to pay attention to this current trend with Israel’s Tax Authority (ITA).
For years, Israelis who own two registered businesses operating in BOTH Israel AND abroad have been ignoring the ITA’s directives relating 𝐓𝐫𝐚𝐧𝐬𝐟𝐞𝐫 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 – but no longer.
Again, this post concerns someone who owns businesses (even partially) in Israel AND abroad. If you only own one entity, even if it operates internationally, this post isn’t for you.
If you have two companies in two different countries, which transfer money to each other, the Tax Authorities of the registered countries can theoretically say:
"𝑾𝒆 𝒇𝒆𝒆𝒍 𝒕𝒉𝒂𝒕 𝒚𝒐𝒖 𝒂𝒓𝒆 𝒏𝒐𝒕 𝒄𝒉𝒂𝒓𝒈𝒊𝒏𝒈 𝒚𝒐𝒖𝒓 𝒄𝒐𝒎𝒑𝒂𝒏𝒚 𝒉𝒐𝒏𝒆𝒔𝒕𝒍𝒚 𝒇𝒐𝒓 𝒚𝒐𝒖𝒓 𝒔𝒆𝒓𝒗𝒊𝒄𝒆𝒔 𝒕𝒐 𝒂𝒓𝒕𝒊𝒇𝒊𝒄𝒊𝒂𝒍𝒍𝒚 𝒍𝒐𝒘𝒆𝒓 𝒚𝒐𝒖𝒓 𝒑𝒓𝒐𝒇𝒊𝒕𝒔 𝒊𝒏 𝒐𝒖𝒓 𝒄𝒐𝒖𝒏𝒕𝒓𝒚 𝒔𝒐 𝒂𝒔 𝒕𝒐 𝒑𝒂𝒚 𝒍𝒆𝒔𝒔 𝒕𝒂𝒙 𝒉𝒆𝒓𝒆."
There is some logic here. Because you are your own client, when transferring money between your different companies, normal market conditions don’t apply.
You can charge yourself whatever you want, and no one is going to stop you.
The international tax profession of Transfer Pricing comes along to apply internationally recognized considerations and market prices to advise you exactly how much should be transferred between your companies.
Thereby, protecting you.
While the ITA created stronger rules regarding Transfer Pricing back in 2023, they are only now making waves about it. And they are doing it 𝐁𝐈𝐆 𝐓𝐈𝐌𝐄.
A large accounting firm I’m working with is currently dealing with 6 cases where the ITA suddenly woke up without warning to scrutinize issues surrounding Transfer Pricing.
𝕀𝕄ℙ𝕆ℝ𝕋𝔸ℕ𝕋: You are susceptible to Transfer Pricing guidelines if you are transferring money internationally between companies owned by yourself 𝐎𝐑 𝐅𝐈𝐑𝐒𝐓-𝐃𝐄𝐆𝐑𝐄𝐄 𝐑𝐄𝐋𝐀𝐓𝐈𝐕𝐄𝐒.
If you think this applies to you – 𝐒𝐏𝐄𝐀𝐊 𝐓𝐎 𝐘𝐎𝐔𝐑 𝐀𝐂𝐂𝐎𝐔𝐍𝐓𝐀𝐍𝐓.
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If international guidelines and accountants are making you dizzy, then perhaps you would benefit from a financial translator and gatekeeper?
Our firm plays this role with a number of our clients, managing communication between the various accountants and government ministries to ensure that our clients are both in-the-know and compliant.
DM me for a free, no-strings-attached introductory call.
𝐅𝐨𝐠𝐞𝐥𝐂𝐅𝐎: 𝐎𝐮𝐭𝐬𝐨𝐮𝐫𝐜𝐞𝐝 𝐅𝐥𝐞𝐱𝐢𝐛𝐢𝐥𝐢𝐭𝐲; 𝐈𝐧-𝐇𝐨𝐮𝐬𝐞 𝐀𝐩𝐩𝐫𝐨𝐚𝐜𝐡.
