Our firm believes in providing comprehensive legal services. Aside from personal and private legal advice, clients of the firm obtain a useful and comprehensive collection of instruments for dealing with the tax issues optimally. Furthermore, our firm takes care to keep our clients up to date on tax developments that are relevant and important to them, based on their line of business and their circumstances.
withdrawals of the owners were recorded as "shareholder payments" (loans) in the financial accounts of a particular company, and even interest income was recognized with the withdrawals by the provisions of Section 3 I of the Regulation of Israel Taxes.
Section 3 (i1) (2) of the Israeli tax ordinance states that if the withdrawal funds were not returned to the company at the end of the tax year following the tax year in which they were withdrawn, the withdrawal from the company will be considered as a shareholder income and classified as a dividend.
To classify the taxpayer's compensation, it must be compared to the reason for which it was received. If the compensation is paid from taxable income as defined in Chapter B of the Income Tax Ordinance (withholding rate of up to 47 percent) or Chapter E of the Ordinance (income from capital gains). If the goal of the compensation is to compensate the taxpayer for the loss of the source of income rather than for the revenue from daily activities, it will be taxed under Chapter E of the Ordinance (Capital Gains).