Israel Tax Authority demands NIS 156m. from eBay
The Netanya-based eBay Marketplace Israel Ltd., which wants to distribute a $230 million dividend to its sole shareholder, has revealed that the Israel Tax Authority is demanding NIS 156.6m. in additional taxes from the company for the 2010-2015 tax years.
The company announced that it planned to appeal its NIS 131m. tax assessment for 2010, while its assessments for 2012-2015 were still open and being discussed with the Tax Authority.
Particulars of the tax assessment are being disclosed in the framework of a petition by eBay Marketplace to the district court to be allowed to distribute a $230m. dividend to eBay Holdings, which owns all of the shares in eBay Marketplace. eBay Holdings is a subsidiary of the international eBay company. The petition is based on an April 11 decision by the board of directors approving the dividend.
The petition stated that as of April 8, eBay’s market cap was nearly $40 billion and its revenue had totaled $9b. in 2016 and $9.6b. in 2017.
eBay Marketplace is the eBay group’s research and development center in Israel. According to the petition, since being acquired by eBay in 2005, eBay Marketplace has been operating on a cost plus basis with a number of eBay group companies, and its activity is profitable. The company now wants to distribute a dividend to eBay Holdinngs from its cash.
eBay Marketplace says that according to its financial statements dated December 31, 2017, it had no profits worthy of distribution that fulfilled the profit test. “The reason is mainly noncash flow losses caused over the past two years by the effect of exchange rate differences on the substantial foreign currency balances held by eBay Marketplace,” the petition states.
The company asserts that despite its financial statements, its board of directors unanimously approved the dividend for eBay Holdings, after being presented with the relevant financial data and an economic opinion stating that even after distributing the dividend, the company was expected to meet its financial obligations.
According to the company, even though the dividend being requested did not meet the profit test, it creates no concern about the company’s ability to meet its obligations on the stipulated date, because the company will still have a NIS 65m. margin of safety after the dividend is distributed.
The conclusion that the company will meet its obligations after the dividend is backed by an economic opinion by Prometheus Financial Advisory CEO Yuval Zilberstein, CPA, indicating that while the company might be assessed for additional taxes in respect of 2010-2015, even if it has to pay its full tax exposure (despite its opinion disputing the Tax Authority’s position), it will be able to do so.