08 January 2016 Israeli District Court rules on treatment of stock based compensation costs under a cost plus arrangement The Tel Aviv District Court ruled on December 24, 2015, on the impact of an employee stock option plan to a cost plus arrangement, an issue that is relevant for most Israeli research and development (R&D) centers servicing related group companies on a cost plus basis. It should be noted that the court's decision was affected by a specific set of circumstances; one being the existence of a retroactive amendment to the inter-company service agreement which excluded the stock options from the cost plus arrangement in hindsight, and another being the transfer pricing study and other documentation presented that was deemed by the court as irrelevant. Accordingly, multinational groups with R&D centers in Israel should review the decision and evaluate its potential impact on the facts and circumstances relevant to each case. A Tax Alert prepared by Ernst & Young's Israel Tax Desk in New York, and attached below, provides additional details. Document ID: 2016-0044 |
