U.S., Israel to Appoint Joint Task Force to Review Bilateral Tax Treaty

On Sunday and Monday, U.S. Treasury Secretary Steven Mnuchin met with Israeli Prime Minister Benjamin Netanyahu, and with his Israeli counterpart Moshe Kahlon. The visit is Mnuchin’s first stop in a Middle-East trip in which he is expected to visit six countries.

 

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On Thursday, Mnuchin announced on Twitter that after consulting with President Trump and Secretary of State Pompeo, he “will not be participating in the Future Investment Initiative summit in Saudi Arabia” in response to the confirmed death of Saudi Washington Post columnist Jamal Khashoggi in the Saudi Istanbul consulate on October 2. However, Mnuchin still plans to travel to Saudi Arabia next week for previously scheduled meetings unrelated to the summit.

In a press conference held in Jerusalem Sunday, Mnuchin said the U.S. has “no better partner than Israel” in the fight against terrorism and terrorist financing. The parties intend to hold discussions regarding terrorist financing and the implementation of the U.S. enforced sanctions against Iran which will enter into force in early November, he said. The talks will also focus on economic issues, adding that one of the purposes is to increase U.S. investments in Israeli infrastructure, and “other economic opportunities” between the two states.

In meetings on Sunday and Monday, Mnuchin and Israeli Minister of Finance Kahlon discussed bilateral taxes, trade issues, and a potential cooperation on housing, a spokesperson for the Israeli Ministry of Finance stated to Calcalist on Monday.

The meetings were held in preparation for the U.S.–Israel Joint Economic Development Group meeting, the annual meeting between the Israeli and U.S. Treasury ministries, held Monday at Jerusalem’s King David Hotel.

Mnuchin and Kahlon agreed to appoint a joint task force to review the tax treaty between the U.S. and Israel, according to a Monday announcement by the Israeli Ministry of Finance. The update to the treaty aims to make obsolete cases of double taxation, an Israeli official said in an interview with Calcalist Monday, speaking on conditions of anonymity.

Perceived as unreflective of the current flow of investments between the countries, a bilateral tax treaty between the U.S. and Israel was first drafted in 1975, coming into effect 20 years later. Now seen as uncompetitive for developed markets, the Israeli tax on foreign direct investments (FDI) stands at 25% on dividends for sole investors and 12.5% for companies. 

The American delegation includes U.S. Ambassador to Israel David M. Friedman, the Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker, and Assistant Secretary of State for Economic and Business Affairs Manisha Singh.