Israel is one of a number of countries (including Italy and the UK) that is considering or enacting rules to tax digital trading in their jurisdiction, but treaty protection needs to be taken into account. Great care is needed in applying treaty benefits to partnerships, particularly UK LLPs. PE preparatory and auxiliary exemptions need to be treated with caution (in particular as a result of BEPS action 7 relating to artificial avoidance of PE status). Foreign subsidiary employees may bring about a taxable PE if they are de facto employees of the parent group. Recent interesting treaty highlights relate to MAP tie-breakers and arbitration, PEs, technical services, business profits and non-discrimination.
