Boost in Israeli investments for UK businesses

The Treasury has announced that a new agreement has been signed with Israel this week—the purpose of which is to boost Israeli and UK investments between the two countries.

Financial Secretary to the Treasury, Mel Stride, signed a Protocol to update the double taxation convention (DTC) with Israel. This further facilitates investment in Israel by several UK companies, whilst allowing for a “reduction in the rates of Israeli tax payable on dividends paid from Israeli companies to the UK,” the Treasury has stated.

Israeli investors looking into UK opportunities will also find that they benefit from the same reductions on UK tax.

The Treasury statement continued: “It also introduces modern anti-avoidance provisions that ensure only those companies engaged in genuine business activity can benefit from the treaty and allows for the exchange of information between the UK and Israel.”

“This agreement will facilitate UK investment into Israel by removing tax barriers to cross-border trade,” Mel Stride commented. “It will also provide important protections against those who seek to use the treaty for tax avoidance purposes.

“I’m delighted to sign this deal with such a close ally, and pleased we now have a treaty that reflects the latest international standards. It is a sign of the continued excellent cooperation between our two countries.”

In 2018, the total generated in trade and services between the two countries doubled, reaching £3.9bn by July 2018.

The Treasury reported: “With Israel’s strong GDP growth, low inflation, and falling unemployment rate, it continues to be a growing market for UK companies. Israel has an excellent reputation for innovation and invention, and is a world centre for R&D.”

Leading exports from the UK to Israel are currently electrical equipment and machinery, whereas we largely rely on Israel for pharmaceuticals—this makes up 70% of Israel’s exports to the UK. They are one of the main suppliers to the NHS.

Furthermore, the New Protocol will provide UK companies with reduced rates of Israeli tax on dividends and interest; there will be no Israeli tax on royalties.

As well as this, UK pension schemes will not suffer under Israeli tax on payments of dividends or interest implementation standards, as agreed per OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. This signature of agreement follows on from the signing of a separate Protocol to the UK’s DTC with Cyprus.

Mr Stride added: “This agreement is great news for many of our high valued ex-servicemen and women in Cyprus, who would otherwise have faced a big tax rise this year. I was determined to do the right thing by them.”

Treasury ministers agreed in December 2018 to a five-year delay to tax changes in this area, due to the concerns raised by those who would be affected.