Switzerland does not approve tax refund because we live in “occupied territory”

An Israeli couple, who live in the Ramot neighborhood of Jerusalem, claim in a lawsuit he filed in court that he is not entitled to a tax refund in huge sums because the couple is considered by Switzerland to live in “occupied territory” that is not included in the State of Israel, Ynet has learned.

The couple filed a NIS 5.6 million lawsuit yesterday (Thursday) against the Israel Tax Authority and the Jerusalem District Assessing Officer. This, on the grounds that their application for a tax refund due to them under the Convention on the Prevention of Double Taxation between Israel and Switzerland was rejected by Switzerland, on the grounds that they are not considered residents of Israel and that their place of residence is not included in the State of Israel.

The lawsuit alleges that at the same time the couple approached the Swiss ambassador to Israel in an attempt to understand how residents of the Ramot neighborhood are not considered Israeli residents for the purpose of the convention, and the answer received from the Swiss embassy in Israel was that (Switzerland) recognizes “Switzerland recognizes State of Israel” Of the UN on the basis of the borders before the 1967 Six Day War (Green Line).

“As a result, the treaties signed with Israel apply only to these restrictions. According to the information provided by the Federal Tax Administration and our investigations, the area with the zip code (indicating the zip code maintained in the LD system) is outside the specified limit, so the double taxation agreement does not apply.”

In response to Ynet’s request, Adv. Alon Ron, the prosecutors’ attorney, stated that “the facts in this case reveal a fault that many Israeli residents are exposed to double taxation on their income abroad only because their place of residence is perceived by Switzerland, and perhaps other countries like it, as territory. Which does not belong to Israel. ”

The lawsuit states that the woman owns shares, which she inherited from her late brother in two Swiss companies, which distribute dividends each year. The plaintiffs state that they engaged in a voluntary disclosure proceeding regarding the plaintiff’s income from the dividends received from the two companies in which it holds shares, from which withholding tax is deducted at a rate of 35%, in accordance with Swiss tax law.

According to the lawsuit, “The voluntary disclosure procedure, which was accompanied by the International Taxation Department of the Tax Authority, was conducted on the basis of a tax official’s determination that under the Convention between the State of Israel and the Swiss Confederation on double taxation on income and capital taxes. At a rate of only 15%, so the plaintiff can apply to the tax authorities in Switzerland for a refund for the overpaid tax at the rate of 20% of the dividends distributed to her.

“At the end of the voluntary disclosure procedure, in view of the position of the Assessing Officer and the International Taxation Department regarding the applicability of the Convention, an assessment agreement was signed and the plaintiffs paid tax totaling NIS 5.3 million for the income from the dividends.”

The plaintiffs note that “the assessment agreement would not have been signed if the parties had not departed from the premise that the convention applied to the woman’s case. If the plaintiffs knew the convention did not apply to them, they would report dividend income and demand full credit paid by the plaintiff in Switzerland.” That they did not have to pay any additional amount to the Israeli Tax Authority.

Following the signing of the assessment agreement, the plaintiff applied to the Swiss tax authorities for a refund for the excess tax deducted, in view of the Convention. To her surprise, her application was rejected on the grounds that her place of residence in the Ramot neighborhood of Jerusalem is “occupied territory” that is not included in the territory of the State of Israel according to the method of the authorities in Switzerland and therefore the Convention does not apply to it.

The couple claim that “this determination by the tax authorities in Switzerland drops the ground under the assessment agreement, which was entered into due to an error originating from the determinations of the representatives of the Tax Authority in Israel, which are now clearly erroneous and misleading. Mutual agreement with Switzerland in accordance with the Convention, in order to avoid a situation of double taxation.

“In addition, they requested that the Director of the Tax Authority exercise his authority and stipulate that as long as the Swiss authorities do not reconsider their position that the plaintiff is not considered a resident of Israel for the purpose of implementing the provisions of the Convention, the assessment agreement will be revoked.”

The plaintiffs claim that although more than 10 months have passed since the plaintiffs’ application to the defendants, no agreement has yet been reached with Switzerland, and the defendants are not even able to assess when the application for mutual consent proceedings will be decided.

“The Tax Authority also refrains from making any decision on the request to cancel the assessment agreement. This is how the plaintiffs, who are of course residents of Israel for all intents and purposes, find themselves in a situation where they actually paid 49% tax on dividend income, which applies to the maximum tax rate. Of only 33%.

“The plaintiffs tried their best to cooperate with the defendants to resolve this absurd and harmful situation, but without success, and the defendants are not even willing to undertake that the situation will be rectified. In these circumstances the plaintiffs have no choice but to go to court to order the revocation of the assessment agreement.” By the plaintiffs by virtue of it. “

The plaintiffs are represented in the legal proceedings by attorneys Alon Ron and Eilat Leshem from the firm of Vardi Leshem Ron, and in the assessment proceedings by CPA Shuki Vita and Shmulik Elegranti from the firm of Vita Elegranti & Co.

The Israel Tax Authority stated that “due to the duty of confidentiality set forth in the law, we will not be able to comment on matters.”