Israel: Tax authority’s intangible property valuation upheld due to insufficient and inconsistent taxpayer documentation

A court decision concerning tax authority’s intangible property valuation

A court decision concerning tax authority’s intangible property valuation

The Tel Aviv-Yafo District Court recently upheld the tax authority’s valuation of intangible property sold by the taxpayer due to insufficient and inconsistent taxpayer documentation.

The case is: CA Software Israel Ltd. V. Tel Aviv 3 Assessing Office

Read a translation of the court decision [PDF 325 KB] provided by the KPMG member firm in Israel


The taxpayer sold the intangible property for NIS 111 million (approximately U.S. $33 million) based on a valuation analysis. The tax authority challenged the core assumptions underlying the valuation analysis, including the expected economic life of the asset and the relevant growth rates, and imposed a deemed value of NIS 667 million (approximately U.S. $196 million). The taxpayer then appealed the tax authority’s determination.

The court denied the taxpayer’s appeal and upheld the tax authority’s valuation determination. While the court acknowledged that the relevant valuation principles are inherently uncertain, the court found that the taxpayer had not met its burden of proof, pointing to the taxpayer’s insufficient and inconsistent documentation from the time of the transaction, and in particular to material disparities in an application filed by the taxpayer with the Israel Innovation Authority in a separate context.

The court also separately addressed the tax authority’s application of a secondary adjustment imposing deemed interest on an intercompany balance created by the primary adjustment for the valuation determination. The court agreed that there was no local regulatory or substantive basis for the secondary adjustment, but still upheld the secondary adjustment based on local High Court precedent.

For more information, contact a tax professional with the KPMG Global Transfer Pricing Services practice in Israel:

David Samson | +(972) 3 684 8970 |

Itay Falb | +(972) 3 684 8908 |


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