Data points
- Group revenue at which an Israeli master file is required[1]
- NIS 150m
- Value threshold on the local file: every related-party transaction is in[1]
- None
- To produce the study after the assessing officer requests it[1]
- 30 days
- Means of control at which two parties are in a special relationship[2]
- 50%
- Group revenue that triggers country-by-country reporting[4]
- NIS 3.4bn
- Indicative operating margin for a low-risk distributor without intangibles[1]
- 3% to 4%
- Indicative net cost plus for marketing services without intangible ownership[1]
- 10% to 12%
- Ceiling on a one-time transaction qualifying for partial relief[1]
- NIS 4,000,000
- Form 1385 is filed per transaction, with the annual tax return[3]
- One form
Israel documents every cross-border related-party transaction, however small, and then gives you 30 days to produce the study once the assessing officer asks. That window used to be 60 days. It was halved in 2022, in the same change that added a master file tier.
The four facts to know:
- A market conditions study is required for every related-party international transaction. There is no value threshold at all.
- A master file is added once consolidated group revenue reaches NIS 150 million.
- Both are kept rather than filed, and produced within 30 days of a request from the assessing officer.
- Form 1385 is the exception. It is filed with the annual tax return, one form per transaction, whatever the amounts.
What transfer pricing documentation does Israel require?
A market conditions study for every related-party cross-border transaction, a master file above a group revenue threshold, a country-by-country report for the largest groups, and Form 1385 with the return. Israel moved to this three-tier structure in 2022. The OECD transfer pricing country profile for Israel[1], updated in October 2022, is the reference for the thresholds below.
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| Obligation | Who it reaches | Threshold | Status | Source |
|---|---|---|---|---|
| Master file | Israeli member of a multinational group | NIS 150 million of consolidated group revenue | Kept. Deadline not confirmed | OECD |
| Local file, the market conditions study | Any related-party international transaction | No value threshold | Kept, produced within 30 days of a request | OECD |
| Country-by-country report | Israeli ultimate parent of a multinational group | NIS 3.4 billion of consolidated group revenue | Filing deadline not confirmed | OECD |
| Form 1385 | Any related-party international transaction | No threshold | Filed with the annual tax return | Israel Tax Authority |
The master file deadline is not confirmed from an official Israeli source. This page flags that rather than inventing a date, and the safe assumption is that the master file exists whenever the local file does.
Do I need a master file in Israel?
Yes, if your Israeli entity belongs to a multinational group with consolidated group revenue of NIS 150 million or more. That was roughly EUR 43 million when the threshold was set in 2022. Below it, no master file is required, and the market conditions study stands alone.
The master file carries the usual group-level content: the group's structure, its business, its intangibles, its intercompany financing and its consolidated tax position. A group that already prepares one for another jurisdiction will usually satisfy Israel with it. The preparation and submission deadline is not confirmed from an official Israeli source.
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What are Israel's local file requirements?
A market conditions study for every international transaction between parties in a special relationship, with no value threshold whatsoever. One cross-border intercompany transaction is enough to trigger it. The study is kept rather than filed, and has to reach the assessing officer within 30 days of a request.
Inside, it is a standard local file: a functional analysis of the Israeli entity's controlled transactions, the method chosen for each, and the benchmarking that supports the price. The content standard changed in 2022 along with the deadline, so a study written to the older single-study regime is now the wrong document as well as a late one.
What is Form 1385 and who files it?
Form 1385 is the declaration of international transactions, filed as an appendix to the annual tax return by anyone with an international transaction with a related party abroad. One form per transaction. It may be completed in Hebrew or English. The Israel Tax Authority publishes the form and its service page[3].
Form 1385 is the only transfer pricing obligation in Israel that is filed proactively, and it is also the one that tells the tax authority exactly which transactions to look at. A related form, Form 1485, applies to certain transactions such as loans and capital notes. Filing Form 1385 while holding no study is the most exposed position a group can take here.
Does Israel require country-by-country reporting?
Yes, at NIS 3.4 billion of consolidated group revenue, roughly the EUR 750 million used across the OECD. It applies to Israeli ultimate parent entities and is mandatory for reporting fiscal years beginning on or after 1 January 2022, as the OECD peer review of Israel's country-by-country reporting[4] records.
Most foreign-parented groups with a small Israeli arm sit far below this tier and file nothing in Israel. The filing deadline and the notification requirement are not confirmed from an official Israeli source.
When is Israel transfer pricing documentation due?
Only two of the four obligations have a confirmed timing rule. The study is due within 30 days of a request, and Form 1385 goes in with the annual tax return. The master file and country-by-country deadlines are not confirmed, and this page says so rather than guessing.
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| Obligation | Deadline | Status | Source |
|---|---|---|---|
| Market conditions study, the local file | Within 30 days of the assessing officer's request | Confirmed. Cut from 60 days in 2022 | OECD |
| Form 1385 | With the annual tax return | Confirmed | Israel Tax Authority |
| Master file | Prepared alongside the documentation | Not confirmed | OECD |
| Country-by-country filing and notification | Not stated officially | Not confirmed | OECD |
Thirty days leaves no room to build a study after the request lands. Benchmarking alone takes longer than that, which is the whole point of the shortened window.
What language can the documentation be in?
Hebrew or English, for both the study and Form 1385. No currency rule is specified. A foreign parent can reuse its English group documentation for the Israeli file without a forced translation, which keeps the local file and the master file consistent with each other.
What are the penalties for getting Israel transfer pricing wrong?
There is no transfer pricing specific documentation penalty. General income tax penalties apply instead. That sounds mild and is not, because the exposure here is the adjustment rather than the fine.
Two features make it sharp. The 30 day window leaves no time to build a study from scratch, so a group without one arrives at the discussion with nothing. And Form 1385 has already told the tax authority which transactions to examine. An adjustment at the Israeli entity flows straight into its corporate tax base, with interest, and no fixed fine caps it.
Does Israel have transfer pricing safe harbours?
Three, and two of them carry numbers you can price against. They are the most usable part of the Israeli regime for a typical research or services subsidiary, because that is exactly the profile they were written for.
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| Safe harbour | Rule | Source |
|---|---|---|
| Low value-adding intra-group services | A simplified approach following the OECD guidelines | OECD |
| Indicative routine returns | Low-risk distributors without intangibles: 3% to 4% operating margin. Marketing services without intangible ownership: net cost plus 10% to 12% | OECD |
| One-time transactions | Up to NIS 4,000,000, or 10% of turnover in the field, exempt from some documentation and comparability requirements | OECD |
Most Israeli subsidiaries of foreign parents are low-risk distributors or cost-plus service providers, so the indicative ranges above describe the majority of real cases rather than an edge case.
Can you get an advance pricing agreement in Israel?
Yes. Unilateral, bilateral and multilateral agreements are all available. For a group with a stable Israeli cost-plus entity, an agreement is the cleanest way to take the margin out of dispute, particularly where the indicative safe harbour ranges do not quite fit the facts.
How do Israel's rules differ from the OECD baseline?
Israel follows the OECD guidelines closely, and the 2022 change aligned its documentation with the three-tier model. Five differences are worth knowing before you map a group policy onto it.
The master file threshold is a local shekel figure rather than a euro one. The local file has no value threshold at all, which is unusual. The safe harbour ranges are Israel's own and are published as indicative returns. There is no transfer pricing specific penalty. And Israel states no domestic preference for comparables and does not use secret comparables, so a regional comparables set is acceptable on its face.
How we help with Israel transfer pricing
Israel gives you 30 days and no threshold to hide behind. We prepare the market conditions study for every related-party transaction, run the benchmarking behind it, keep the master file aligned with the group's, and complete Form 1385 so the return and the study tell the same story. See how our transfer pricing software works.
Book a demo for an assessment of your Israeli entity's documentation exposure before the next request.
Official sources
4 sources
- 1.OECD. Transfer pricing country profile: Israel (October 2022)
- 2.International Center for Not-for-Profit Law. Income Tax Ordinance (New Version), 5721-1961
- 3.Israel Tax Authority. Form 1385: declaration of international transactions
- 4.OECD. Country-by-country reporting peer review: Israel (2024)
Article by
Sam Suechting
Head of Product, Commenda
Sam is a seasoned expert in sales tax, leading Commenda's effort to build the worlds most comprehensive database of global tax rules and business regulations. At Silverhaze Partners, he worked in early-stage venture capital, where he saw firsthand how tax complexity and regulatory friction hold back startups from scaling internationally. That experience now powers his work at Commenda-bringing clarity, precision, and real-world insight to one of the most frustrating parts of doing business globally.
Disclaimer: Commenda and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
