The Israel Tax Authority (ITA) has released Circular 04/2026, a comprehensive and binding guide for the updated Form 150. This circular marks a significant escalation in transparency requirements for Israeli taxpayers holding assets or interests in foreign entities. Far from a mere technical update, the new form—mandatory for 2023 tax returns filed from 2025 onwards—requires the disclosure of strategic information that previously remained outside the immediate view of the tax assessor.

The ITA now mandates the use of an expanded version of Form 150 (released December 2024) for tax years 2023 and beyond. The updated form requires unprecedented detail regarding the identity of directors, "Cell" structures in investment funds, and deep financial data for any holding of 25% or more. Crucially, the circular implements Amendment 272 to the Tax Ordinance, which effectively ends the 10-year reporting holiday for New Immigrants (Olim) and Veteran Returning Residents arriving in Israel as of January 1, 2026, specifically regarding these foreign holdings.
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Quick Review

• Broad Reporting Obligations: For private foreign companies, reporting is mandatory for any percentage of holding (even 0.1%). For publicly traded companies, the threshold remains at "Control" (10% or more).
• The End of the "Reporting Holiday": New Immigrants and Veteran Returning Residents who become Israeli residents from January 1, 2026, must file Form 150 starting from their first year of residency.
• Control and Management Test: The form now explicitly requires disclosing whether any directors or managers are Israeli residents—a critical data point for the ITA to claim the foreign entity is an Israeli resident for tax purposes.
• Transparent Entities Included: Reporting is mandatory for tax-transparent entities, such as U.S. LLCs or foreign partnerships, which fall under the definition of a "Foreign Body of Persons."
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What Has Changed in Form 150?

The circular clarifies that Form 150 is no longer just a declaration of ownership; it has evolved into an investigative tool for analyzing complex tax regimes, including Controlled Foreign Corporations (CFC), Foreign Professional Corporations (FPC), and Transfer Pricing.

1. Deconstructing "Cell" Structures (Protected Cell Companies)

A major innovation in the circular (Section 2.3.3) concerns entities with variable capital structures (such as SICAVs or structured funds). Taxpayers must now treat each "Cell" or "Sub-fund" as a separate entity for reporting purposes. If a taxpayer holds rights in a specific "Cell," they must calculate their holding percentage relative to that cell alone, rather than the entire umbrella corporation.
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2. Direct and Indirect Holdings – Aggregation Rules

The circular establishes a dual mechanism for calculating indirect holdings through a chain of companies:

• The Control Test: If a taxpayer holds over 50% of Company A, they are deemed to hold directly whatever Company A holds.
• The Product Test: If the holding is below 50%, the taxpayer must calculate their share of rights to profits by multiplying the percentages of holdings along the chain.
  A reporting obligation arises if the taxpayer is considered a "Controlling Member" (10% or more) under either test.
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3. Enhanced Information Requirements (Part C of the Form)

For holdings of 25% or more, taxpayers must provide granular financial and managerial data, including:

• Whether the company is taxed in its country of residence on a territorial basis (taxed only on local income).
• Whether the company files a consolidated return in a "Reciprocal Country" (a country with a tax treaty with Israel).
• Detailed breakdown of passive income and undistributed profits (to assess deemed dividend tax under CFC rules).
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Takeaways

• Re-map the Corporate Group: Israeli companies with foreign subsidiaries must ensure that their Form 150 filings align with managerial reality. Listing Israeli directors on the form may trigger an ITA claim that the foreign subsidiary is actually an Israeli resident for tax purposes under the "Control and Management" test.
• Pre-Aliyah Planning for 2026: Individuals planning to move to Israel in 2026 must understand that their foreign financial privacy will be exposed to the ITA from day one. Pre-residency tax planning is essential to evaluate the impact on existing structures.
• Reporting Mid-Year Sales: Even if you sold all foreign holdings during the tax year, the circular (Section 2.1.4) mandates reporting. You must report a 0% holding at year-end but disclose the highest percentage held during the year.
• Trusts and Trustees: Trustees of Israeli-resident trusts must ensure Form 150 is attached to the trust's annual return (Form 1327), as the ITA treats these trusts as Israeli residents for reporting purposes.
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FAQ

Q: Am I required to report a 1% holding in a private foreign company?
A: Yes. Unlike publicly traded companies (where the threshold is 10%), any holding in a private foreign entity—no matter how small—triggers a mandatory Form 150 filing.

Q: Does the new form apply to 2023 tax returns already filed?
A: If the return was filed before January 1, 2025, the previous version of the form was acceptable. However, any 2023 return filed on or after January 1, 2025, must use the new, expanded format.

Q: What is the significance of a "Reciprocal Country" on the form?
A: This refers to a country that has a Double Tax Treaty with Israel. If the foreign entity is a resident of such a country, the calculation of its profits for CFC/FPC purposes may follow local tax laws, which can often be more favorable for the taxpayer.

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