Israel Tax Agency Issues Posts Circular Clarifying Income Taxation Related to R&D Centers

The Israeli Tax Authority Nov. 2 posted online Income Tax Circular No. 8/2025, clarifying income taxation related to domestic R&D center units of multinational entities (MNEs). Topics covered include: 1) conditions for changing from the expense-based transfer pricing method, for the center’s provision of R&D services; 2) conditions to increase the expense-based margin over 14 percent; 3) individual tax rulings in cases of acquisitions of a domestic company by a nonresident company, and the transition to a limited-risk R&D service model while selling the acquired company’s intangible assets; 4) individual tax rulings to determine the compensation received by a domestic ...