Mobileye deal tax to be paid in dollars

Mobileye Photo: PR

"The Tax Authority's decision is tantamount to unprecedented intervention in the forex market."

Tax revenues from the Intel-Mobileye(NYSE: MBLY) deal will be paid in dollars, not shekels, the Israel Tax Authority announced today. $1.1 billion will be paid into the Bank of Israel dollar account when the deal is completed. According to the announcement, the agreement formulated by the Tax Authority's management, the Ministry of Finance Accountant General Department, and the Bank of Israel states that if the sale of Mobileye to international company Intel goes through, Intel will be able to pay the tax on the deal (withholding tax) in dollars, in order to avoid the effect of the exchange rate and the excessive appreciation of the shekel.

The $15 billion Mobileye-Intel deal, the largest-ever acquisition of an Israeli high-tech company, will enrich the state treasury by at least NIS 4 billion in the form of tax payments by Israeli shareholders in Mobileye. These payments will actually be withheld by Intel from the deal proceeds paid to the shareholders. A further source of tax revenues will be tax paid by Mobileye employees on their profits from the deal.

"If Mobileye had to sell the dollars for the tax, the conversion would amount to NIS 4-5 billion, and it would have a dramatic effect on the shekel-dollar exchange rate. This would have affected the market. Buyers from the other side of this agreement would have been needed. The Tax Authority's measure was designed to prevent an irregular effect on the shekel-dollar exchange rate," Shenhav & Co. managing partner Dr. Ayal Shenhav, who specializes in taxes and high tech, explained.

In a talk with "Globes" a senior Tax Authority source called the measure "an extraordinary step," but tax experts and market sources used much stronger language, saying, "It is a historic and dramatic decision." Prico - Forex, Financial Risk Management, Investment Consultancy CEO Joseph Fraiman said, "This is a historical precedent. What the decision means is that the Ministry of Finance, even if it did not make an official announcement, has decided to intervene in the foreign currency market. The way the Ministry of Finance is intervening is through the Tax Authority, but there may very well be additional initiatives in the matter later."

Published by Globes [online], Israel Business News - www.globes-online.com - on May 16, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Mobileye Photo: PR
Mobileye Photo: PR
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