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What is International Taxation?

Being Israeli residents, all income, whether obtained locally or internationally, is taxed under the Israeli Income tax. However, there are certain circumstances when we may be considered residents of a different country than Israel. This situation may imply payment liability in both countries and may be required to pay double tax. Starting 2003, taxation legislation in Israel was changed so that the taxation became personal, meaning that taxation is calculated based on personal income, regardless of resident locality. This change reflects the adjusting of tax legislation to the modern global economy, in which many Israeli residents and residents of other countries are generating income in several locations around the world. As we see recently, such situations occur more frequently than before and there is a need for respective legislation to prevent double taxation.

The current state of tax legislation

Many people are interested in understanding international tax and its effect on their state of taxation. When an Israeli resident has already paid taxes on income generated in another country, he may be entitled to receive a tax credit on the amount paid. In order to regulate this situation, many states sign bilateral tax treaties that aim to prevent double taxation, or, alternatively, prevent evading tax payments, as well as encourage economic ties between states. Tax treaties achieve these goals by creating a formal distribution of tax payments between the states. Israel has signed tax treaties with dozens of countries including United States, Canada, Russia, Japan, India, Finland and more.

Why we need to have better understanding of International tax issues?

The answer to the question of what international taxation is should be of interest to many people who operate in different countries. Without proper understanding of the aspects of international taxation, these people may suddenly find themselves owing taxes and overpaying in two countries. Understanding the implication of international taxation, allows better decision making and planning your conduct of business according to the respective countries you operate. We strongly suggest consulting with CPA, should you expect to have multiple source of income, both domestic and international. International taxation is a complex area of expertise that requires in-depth knowledge of numerous details of legislation and procedures. Lack of planning and incorrect approach may lead to significant loss of funds and unnecessary spending and worries. For your best interest and peace of mind, please consult a professional with appropriate knowledge and experience, who will guide you through the international taxation maze.

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Vita Elegranty & Co. is an accounting firm, specializing in creating tailor made taxation strategy and approach for select customers.

The firm was founded and is led Shuki Vita and Shmulik Elgranaty, certified CPAs and law scholars who have served as seniors at the Israeli Tax Authority.

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