Israel published the Income Tax Regulations (Determining Market Conditions) (Amendment) 2022 on 22 September 2022, which takes into account the amendments to the Income Tax Ordinance adopted on 30 June 2022 for the introduction of the three-tiered transfer pricing documentation requirements of BEPS Action 13. The amendments to the Regulations are in line with the amendments to the Ordinance, including:

• Stricter transfer pricing documentation requirements in line with the OECD Local file guidelines;
• A Master file requirement for members of MNE groups with turnover exceeding ILS 150 million; and
• Country-by-Country (CbC) reporting requirement for MNE groups meeting a consolidated revenue threshold of ILS 3.4 billion.

Other important changes provided by the amendments include a reduction in the time limit to submit transfer pricing documentation (Local file) from 60 days following a request by the tax authority to 30 days, which also applies for Master file submission if required. Further, enhanced disclosure requirements are introduced as part of the annual tax return, including details on international transactions, as well as details on the taxpayer's MNE group, the ultimate parent, consolidated group revenue in the previous year, and the ultimate parent's obligation to submit a CbC report.

The amendments also clarify the secondary local file requirements by non-parent entities in Israel. This includes that a non-parent constituent entity may be required to file if:

• The ultimate parent is not required to file a CbC report in its jurisdiction of residence;
• There is no competent authority agreement for the exchange of CbC reports in force with the ultimate parent's jurisdiction of residence; or
• The exchange of information with the ultimate parent's jurisdiction of residence has been suspended contrary to the terms of an agreement or no information was exchanged for some other reason.

As with the amendments to the Ordinance, the amendments to the Regulations apply from the 2022 tax year, although companies may submit a CbC report according to the law for the 2021 tax year as well, which is due by 31 March 2023.