Dividend income: Part of the income of the minority company will be attributed to its controlling shareholder, when it is an income derived from a dividend distributed to it from a company in which the controlling shareholder is an active shareholder, as long as the minority company is not a controlling shareholder in the company that distributed the dividend. It should be noted that in this section, the term "active shareholder" is defined as a shareholder whose income was derived from the income of the company that distributed the dividend, in whole or in part, was derived from his personal labor (Section 62A(A3) to the Ordinance). This alternative is also not is at the center of the petitions.
At the same time, it was determined that In section 62A The Ordinance contains various provisions regarding the manner in which various expenses of the minority company should be deducted when calculating its taxable income, when it is determined that its income must be attributed to the controlling shareholder or shareholder therein (Subsection (C1)); And with regard to the manner in which it is to be acted when it is determined, for tax purposes, that the income of a minority company is regarded as the income of a shareholder in it (subsection (c2)).
- And now for the second central arrangement set out in the framework of the law. Sections 81a-81F of the Ordinance led to the establishment of a new tax - a tax imposed on excess profits accumulated in the coffers of a few companies (hereinafter: the Excess Profits Tax). As noted above, when a company does not distribute dividends to its shareholders, it is in fact benefiting from an interest-free state loan for an unlimited period of time, at the amount of tax that its shareholders will be charged after the distribution. The purpose of the tax set on excess profits is to detract from companies that do not take advantage of the tax benefit for the purpose for which it was determined, the economic incentive to avoid distribution. The additional tax set on excess profits, at a rate of 2%, is intended to reflect the time value of the money in relation to the period during which the profits are kept in the company's coffers. It should be noted that since the decision to keep the excess profits in the company's coffers has a negative impact on the general public, the tax imposed on the excess profits is in fact a Pigouvian tax - i.e., a tax intended to correct market failure, and to bring about the socially efficient conduct of the various players.
- At the core of the arrangement that determines the tax on excess profits are sections 81B and 81C of the Ordinance. Section 81B(a) states that:
A minority company will be liable to pay a tax increment, for each tax year, at the rate of 2% of the amount of the surplus profits of the minority company, as calculated under section 81c, after the amount of a dividend distributed in the tax year has been deducted from them (in this section - an addition to the tax).