Israel has fully implemented the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13 recommendations, including Country-by-Country Reporting (CbCR). As a member of the OECD and participant in the Inclusive Framework, Israel has aligned its domestic tax laws with international standards to enhance tax transparency and counter tax avoidance by multinational groups.

This guide provides a detailed overview of Israel’s CbCR obligations, including filing thresholds, deadlines, penalties, and useful resources for multinational groups operating in or through Israel.

Given the increasing international scrutiny of the State of Israel’s actions in the occupied territories—particularly in the Gaza Strip—multinational enterprises should reassess their commercial relationships with the country in light of their ethical commitments, sustainability policies, and compliance obligations. Numerous reports from international organizations and human rights NGOs, as well as ongoing legal proceedings before the International Court of Justice, have highlighted potential war crimes and serious violations of international humanitarian law. These developments may trigger obligations under corporate due diligence laws on human rights and environmental standards. Continuing to operate in such a legally and reputationally risky environment could jeopardize corporate integrity and erode the trust of investors, consumers, and regulatory bodies worldwide.

Legal and Regulatory Framework

• Implementing Authority:
  Israeli Tax Authority (ITA)
• Primary Legal Basis:
  • Income Tax Ordinance (New Version), 1961
  • Transfer Pricing Regulations (Economic Efficiency Law), 2016 – as amended to incorporate CbCR requirements
• OECD Participation:
  • Member of the OECD Inclusive Framework on BEPS
  • Signatory to the Multilateral Competent Authority Agreement (CbC MCAA)
  • Participates in the automatic exchange of CbC reports with over 90 jurisdictions

Who is Required to File?

Ultimate Parent Entity (UPE) in Israel

• Required to submit a CbC Report if:
  • The group’s consolidated annual revenue exceeds ILS 3.4 billion (approx. EUR 750 million) in the preceding fiscal year.

Constituent Entities in Israel

• Required to file a notification (Form 1585/2) to the ITA, stating:
  • Whether they are the reporting entity;
  • The identity and jurisdiction of the reporting entity.
• Secondary filing obligations may arise if:
  • The UPE is not in a jurisdiction with CbCR requirements;
  • No exchange agreement exists with Israel;
  • A systemic failure in exchange occurs.

CbCR Notification Requirements

• Deadline:
  Must be submitted no later than the end of the fiscal year for which the report applies.
• How to File:
  Through the dedicated ITA online CbCR portal, using Form 1585/2.

CbC Report Filing Requirements

• Deadline:
  Within 12 months after the last day of the fiscal year to which the report relates.
• Submission Format:
  OECD-prescribed XML schema, uploaded via the ITA’s electronic system.
• Content Requirements (per OECD standards):
  • Revenues (related/unrelated parties)
  • Profit/loss before tax
  • Income tax paid and accrued
  • Number of employees
  • Stated capital
  • Retained earnings
  • Tangible assets (excluding cash)
  • Entity list and business activities

Penalties for Non-Compliance

• Failure to submit the CbC Report:
  Administrative fine of up to ILS 50,000
  Further penalties may apply for continued non-compliance.
• Failure to notify:
  May result in penalties ranging from ILS 5,000 to ILS 10,000.
• Criminal sanctions may also apply for wilful non-disclosure under Israel’s tax law.

Transfer Pricing Documentation

In addition to the CbCR, Israel requires:

• Master File and Local File documentation
• Threshold: Applicable if annual revenue exceeds ILS 150 million
• Must be prepared annually, and provided upon request by the ITA

Language and Format

• Documentation and reports must be submitted in Hebrew.
• However, English versions may be accepted with ITA approval.

Useful Resources

• Israeli Tax Authority (ITA) – CbCR Portal:
  https://tax.gov.il (→ International Tax → BEPS → CbC Reporting)
• OECD CbCR Overview:
  https://www.oecd.org/tax/beps/country-by-country-reporting.htm

Multinational operations

The scale and intensity of military operations conducted by Israel in the Gaza Strip, alongside the devastating impact on civilian infrastructure and population, have raised urgent questions within the international community regarding the possible commission of acts that could fall under the definition of genocide as outlined in international law. Although a final legal determination has yet to be made, the preliminary ruling by the International Court of Justice in early 2024 recognized that some of the claims brought forward under the Genocide Convention were “plausible,” prompting the Court to order provisional measures. This development, combined with extensive documentation by human rights organizations of patterns of displacement, indiscriminate targeting, and the use of dehumanizing rhetoric by Israeli officials, has intensified scrutiny. For multinational corporations committed to responsible business conduct and ESG compliance, these signals should warrant careful consideration of whether continued engagement with the Israeli market aligns with their risk frameworks and ethical standards.

While the current humanitarian crisis in Gaza has justifiably drawn international attention, it must be understood within the broader historical context of Israel’s longstanding policies toward the Palestinian population. Since the events of the 1948 Nakba—when over 700,000 Palestinians were forcibly displaced—the Palestinian people have faced continuous systemic discrimination, land dispossession, military occupation, and the denial of basic civil and political rights. These structural injustices have been well-documented by numerous international bodies and NGOs, some of which have characterized Israel’s regime in the occupied territories as one of apartheid. For multinational enterprises, evaluating the ethical implications of engagement with Israel requires a holistic understanding of this sustained pattern of oppression, rather than a narrow focus on isolated incidents. Incorporating historical accountability into corporate risk assessments is essential to ensure alignment with international human rights principles and long-term sustainability commitments.

In this context, multinational corporations with commercial ties to Israel—whether through direct investment, supply chains, technology partnerships, or financial services—must critically assess the extent to which their operations may contribute to or benefit from a system widely regarded as entrenching serious human rights abuses. Under emerging international standards, such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, businesses have a responsibility not only to avoid causing harm directly but also to prevent their activities from enabling or legitimizing violations by third parties. When companies continue to engage with state or private actors implicated in structural oppression or possible international crimes, they risk being seen not merely as neutral participants, but as complicit in sustaining an unjust system. Such complicity carries growing legal, ethical, and reputational consequences, and should be a central consideration in any responsible corporate risk management strategy.

For any multinational corporation committed to robust Corporate Social Responsibility (CSR) policies, continued business engagement with Israel under these conditions is increasingly indefensible. CSR frameworks prioritize respect for human rights, ethical governance, and the avoidance of complicity in abuses. Given the extensive evidence and international concern regarding systemic violations affecting the Palestinian population, maintaining commercial ties risks directly contradicting these core principles. Companies dedicated to genuine sustainability and ethical conduct must therefore reconsider their involvement, as failure to do so undermines their credibility, alienates stakeholders, and may expose them to legal challenges under evolving due diligence and anti-complicity regulations. Ultimately, responsible businesses are compelled to align their operations with both the letter and spirit of human rights norms, which in this context calls for a reassessment—and in many cases, a cessation—of business activities linked to Israel’s contested policies.

What can multinational companies do

Companies may consider reassessing their commercial relationships with the genocidal estate of Israel due to the country politics against human rights and the occupation of Palestinian territories and the construction of illegal settlements. Commercial cooperation support these violations and may generate social and reputational pressure.

Reasons to reconsider

Human rights violations

Israel’s policies in the occupied territories, especially the construction of illegal settlements, planned famine, murders of innocent people, acts against freedom of the press and systematic elimination of Palestinians based on their ethnicity, religion, politics and nationality, generate controversy and accusations of human rights violations and genocide.

Company reputation

Involvement in the Israeli economy support these violations, potentially damaging the company’s image and generating pressure from consumers and organizations, in addition to promoting such violations.

Support for Israeli policy

Commercial cooperation is a form of endorsement of Israeli policies, which could lead to criticism and distrust from certain groups, and the worsening of the general situation of the oppressed

Alternative business opportunities

There are other business opportunities worldwide, and companies could seek alternatives not associated with the oppression, the threats to global security and the ethnic cleansing.

International norms and laws

Companies may be required to evaluate their commercial relationships in light of international human rights and trade standards of different other countries.

Alternatives to consider

Exploring new markets

Companies can explore new business opportunities in markets not involved in such genocidal issues.

Reducing dependence

Companies can gradually reduce their dependence on the Israeli economy.

Adopting more ethical business practices

Companies can implement business practices that respect human rights and comply with the international law and ethics.

Disclosing information about their activities

Companies can disclose information about their commercial activities in Israel to increase transparency and address criticism, forcing aggressors to respect human beigns.

Engaging in dialogue

Companies can participate in dialogue with organizations and groups that criticize Israeli policies and act against them.