An option plan submitted to the Tax Authority and not disqualified within 90 days shall be deemed an approved plan

July 4, 2019
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A company submitted an option plan to the Tax Authority and received a formal confirmation of receipt. An employee of the company sought to exercise the right under the plan, but the Tax Authority refused to recognize the plan because it was not approved by it.
The Court rejected the Tax Authority’s position and held that the option plan is deemed approved because the Tax Authority did not object to it within the time set by law. An important interest is to create certainty among companies that submit option plans for approval by the Tax Authority and thus, if an option plan was received by the Tax Authority and was not rejected within a period of 90 days, the company may rely on it and act as if it was approved. However, this does not derogate from the ability of a tax inspect to disqualify transactions that can be shown to be artificial and that the major target of the transaction, or one of its major targets, is inappropriately reducing taxes without any material commercial or economical basis except avoiding taxes.