Tax insight

Israeli District Court rules on Gotex beneficial ownership case

Insight
5 minute read
September 05, 2025

What happened?

The District Court in Israel on July 29, 2025, issued a judgment in the case of Gotex Swimwear Brands Ltd (the Company). The key issue was whether a Dutch company was the beneficial owner of a dividend paid by the Company, for purposes of the Israel-Netherlands tax treaty. The Israeli Tax Authority (ITA) argued that the Dutch company was not the beneficial owner of a dividend paid by the Company and therefore the rate of withholding tax on the dividend should be the domestic rate of 30%. The Court ruled that the Dutch company was the beneficial owner of the dividend such that the 5% withholding tax rate under the Israel-Netherlands tax treaty applies.

Why is it relevant?

To be eligible for a reduced rate of withholding tax on certain cross-border payments (for example, dividends, interest, and royalties) under a tax treaty, the recipient must be eligible for tax treaty benefits, including being the "beneficial owner" of the income.

Actions to consider

Companies should evaluate the impact of this decision on the withholding tax treatment of cross-border payments that are made out of Israel.