Advance pricing agreements


Does the country have an advance pricing agreement (APA) programme? If so, is the programme widely used? Are unilateral, bilateral and multilateral APAs available?

The Income Tax Regulations (Determination of Market Conditions) (TP Regulations) stipulate in article 85A(d) the conditions under which an APA may be concluded and delineate the scope of an APA.

APAs are not common in Israel, although they exist; settlement can sometimes also be carried forward as part of an APA. However, settling a past audit cannot guarantee the same treatment in the future unless an APA is reached.

Available types of APA include unilateral, bilateral and multilateral APAs.


Describe the process for obtaining an APA, including a brief description of the submission requirements and any applicable user fees.

An APA is a tool that taxpayers can use to cover their international dealings and reach a prior agreement with the Israeli Tax Authority (ITA) on the pricing of those dealings. However, there is no specific guidance on the content of an APA application. An initial APA request should be sent to the Transfer Pricing Department (TPD) of the ITA and include:

  • the essential facts;
  • the transfer pricing documentation;
  • relevant documents, approvals, opinions, declarations, estimates and agreements;
  • a description of the intercompany transactions; and
  • the taxpayer’s proposed consideration for the transactions, including the profit level margin.
Time frame

How long does it typically take to obtain a unilateral and a bilateral APA?

The ITA has a 120-day time frame within which it must approve or reject an APA application; however, a 60-day extension may be granted where notice is given to the taxpayer. If the ITA does not issue its decision within the time limits provided, approval of the APA will be considered to have been given, and the transaction subject of the APA will be deemed to be at arm’s length. It is not uncommon to hold a meeting with the ITA prior to formally initiating the process.


How many years can an APA cover prospectively? Are rollbacks available?

The validity period for an APA is usually five consecutive years or less, as agreed between the taxpayer and the ITA. The APA provisions are prospective in nature, and there is no option for rollback.

There is no specific guidance for a renewal procedure. In practice, the ITA supports APA renewals; however, the procedure is similar to that for initial APAs.


What types of related-party transactions or issues can be covered by APAs?

APAs cover any type of international transaction carried out between related parties.


Is the APA programme independent from the tax authority’s examination function? Is it independent from the competent authority staff that handle other double tax cases?

No, the competent authority in charge is the TPD, which is part of the ITA.

Advantages and disadvantages

What are the key advantages and disadvantages to obtaining an APA with the tax authority?

An APA provides the following benefits:

  • certainty in respect of the tax outcome of the taxpayer’s international transactions by agreeing, in advance, the arm’s-length pricing or pricing methods to be applied to the taxpayer’s international transactions covered by the APA;
  • removal of an audit threat (minimising the rigours of audit) and deliverance of a particular tax outcome based on the terms of the agreement;
  • the possibility of establishing a good relationship with the tax authorities;
  • prevention of future transfer pricing adjustments and double taxation of results at the group level;
  • substantial reduction of compliance costs over the term of the APA for the taxpayer as it is not necessary to prepare a transfer pricing study for the transactions covered by the APA during its validity period; and
  • for tax authorities, reduction of the cost of administration and the freeing up of scarce resources.


The disadvantage of an APA is the comprehensive transparency it involves, and the relatively long time period required for completion in comparison to a transfer pricing study.