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An overview by Herzog, Fox & Neeman, Taxand Israel
The Jerusalem District Court has recently ruled that Ir Shalem, the insurance agency of the Bank of Jerusalem, must be reclassified from “Registered Dealer” to “Financial Institution” under Section 58 of the VAT Law.
Applying a substance-over-form approach, the court found the agency to be an integral part of the bank’s financial activity, as it operates solely to provide mandatory life and property insurance to the bank’s mortgage customers and is entirely dependent on the bank’s business. Rejecting the VAT Authority’s objections, the court clarified that classification must reflect the entity’s actual functions, setting an important precedent for subsidiaries of financial institutions when assessing their VAT status.
Mordechai Fogel, Iris Weinberger and Ofer Granot from our Israeli member firm Herzog, Fox & Neeman have published a more detailed overview of the ruling and its implications here.
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