Israel vs Broadcom, Aug 2019, Israeli Supreme Court, Case No 2454/19

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In 2012 Broadcom Corporation acquired all the shares of Broadlight Inc, another US corporation which owned a subsidiary in Israel, for around $200 million.

Three months later, the subsidiary in Israel sold its IP to a group company for $59.5m and then an agreement was entered according to which the subsidiary going forward would supply R&D, marketing and support services to the other group companies for a cost plus fee.

Based on these facts the Israeli tax authorities issued an assessment equivalent to $168.5m. The tax authorities found that the full value of the company in Israel had been transferred.

The tax assessment was brought to court where Broadcom claimed that the tax authorities had re-characterised the transaction and that the onus of proof was on the tax authorities to justify the value of $168.5m.

The District Court held that all the values in the Israeli subsidiary had been transferred and ruled in favor of the tax authorities.

This ruling was upheld by the Supreme Court.

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Israel vs BC 2454-19

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