The Israeli tax authorities in December 2022 published an updated Form 1385 (Declaration Form Regarding International Transactions Between Related Parties), which must be included with taxpayers’ annual tax return.
The main change in the new version of the form is that taxpayers now must declare whether a transfer pricing analysis was prepared in accordance with Israeli transfer pricing documentation requirements, for the date of submission of the tax return to the tax authorities. If the taxpayer claims that a transfer pricing study was prepared when in fact it was not, the taxpayer may be subject to penalties for making a false representation to the tax authorities.
There is no doubt that this requirement in the form is an upgrade to the reporting requirements determined by the Israeli tax authorities.
The new form may be downloaded here: Form 1385.
Background
The Israel Knesset on 30 June 2022 approved transfer pricing legislation that introduced the three-tiered documentation requirements of BEPS Action 13.
The legislation, which entered into force in 2022, provides that ultimate parent entities of multinational enterprise (MNE) groups that meet a consolidated revenue threshold of ILS 3.4 billion are required to submit a country-by-country (CbC) report.
Amit Shalit
BDO in Israel