Transfer pricing in Israel

Transfer pricing in Israel at a glance

Regulation Type National regulations based on OECD Guidelines
Are there specific transfer pricing regulations? Yes
Submission deadline N/A
Submission deadline upon request 30 days
Annual update required Yes
Official language requirements Hebrew, English
Potential impact of penalties N/A

Isralian tax law

Rules for transfer pricing in Israel are based upon:

  • Income Tax Ordinance §85A, and
  • Income Tax Regulations (Determination of Market Terms), 2006 provide guidance on transfer pricing.


The Israeli Tax Authority considers its transfer pricing rules and regulations to be consistent with the OECD Transfer Pricing Guidelines. However, usually a local adaptation is necessary, mainly with respect to the interquartile range when the CUP method is used, and the decision of whether to use local, European or US comparables. Israel also adopted a combination of hierarchy and best method selection, where the CUP is the superior method and the rest are secondary to CUP but equally so.


Accepted methods

Accepted methods are:

  • Comparable uncontrolled price method
  • cost plus method
  • resale price method
  • the transactional net margin method
  • the profit split method
  • the residual profit split method
  • other unspecified methods

Priority of methods

Transaction-based methods are preferred over profit- based methods.

Documentation requirements

Information that should be included in the documentation:

  • Taxpayer’s group structure, the parties to the international transaction, their residency and any special relations between the taxpayer and the other parties
  • The contractual terms, including specifications of the asset, the service granted, the price paid, the loan and credit terms and related guarantees
  • The taxpayer’s area of activity and any relevant developments
  • The economic environment in which the taxpayer operates and the related risks
  • Details of all transactions entered into by the taxpayer with a related party
  • An economic analysis

The taxpayer is also required to attach additional documents that corroborate the data submitted, such transaction contracts and any other contracts between the related parties and tax returns filed with foreign taxing authorities.


Generally, documentation may be submitted in English or in Hebrew. The Israeli Tax Authority may require, in certain circumstances, the submission of documentation in Hebrew, the official language of Israel.

Requirements to prepare documentation annually

There is no statutory deadline for the preparation of documentation. However, an appropriate arm’s length analysis is required prior to the submission of the declaration form.

Submission deadline upon request by tax authorities

Documentation must be submitted within 60 days of a request.

Advance Pricing Agreements


Rules for transfer pricing in Israel provide an option to obtain an Advance Pricing Agreement (APA).


Rules for transfer pricing in Israel do no provide for any regulations about the term for which an APA is agreed upon.


Rules for transfer pricing in Israel do provide specific transfer pricing penalties. This means that ordinary penalties apply. | the global transfer pricing reference guide