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April 27, 2021

OECD releases Israel Stage 2 peer review report on implementation of Action 14 minimum standard

Executive summary

On 15 April 2021, the Organisation for Economic Co-operation and Development (OECD) released the Stage 2 peer review reports of Israel relating to the outcome of the peer monitoring of the implementation of the Base Erosion and Profit Shifting (BEPS) minimum standard under Action 14 on improving tax dispute resolution mechanisms. Stage 2 focuses on monitoring the follow-up of any recommendations resulting from Israel’s Stage 1 peer review report.1

Overall, the report concludes that Israel addressed most of the shortcomings identified in its Stage 1 peer review report.

Detailed discussion


In October 2016, the OECD released the peer review documents (i.e., the Terms of Reference and Assessment Methodology) on Action 14 which form the basis of the Mutual Agreement Procedure (MAP) peer review and monitoring process under BEPS Action 14.2

The Terms of Reference translate the minimum standard approved into a basis for peer review, consisting of 21 elements complemented by 12 best practices. The Terms of Reference assess a Member’s legal and administrative framework, including the practical implementation of this framework to determine how its MAP regime performs relative to the 21 elements in four key areas: (i) preventing disputes; ii) availability and access to MAP; iii) resolution of MAP cases; and iv) implementation of MAP agreements.

The Assessment Methodology establishes detailed procedures and guidelines for a two-stage approach to the peer review and monitoring process. Stage 1 involves the review of a Member’s implementation of the minimum standard based on its legal framework for MAP and the application of this framework in practice. Stage 2 involves the review of the measures taken by the Member to address any shortcomings identified in its Stage 1 peer review. In light of the above, the OECD has also released a schedule for Stage 1 of the peer review and a questionnaire for taxpayers. The schedule catalogues the assessed jurisdictions into 10 batches for review.

Both of these stages are desk-based and are coordinated by the Secretariat of the Forum on Tax Administration’s (FTA) MAP Forum.3 In summary, Stage 1 consist of three steps or phases:

  1. Obtaining inputs for the Stage 1 peer review
  2. Drafting and approval of a Stage 1 peer review report
  3. Publication of Stage 1 peer review reports

Input is provided through questionnaires completed by the assessed jurisdiction, peers (i.e., other members of the FTA MAP Forum) and taxpayers. Once the input has been gathered, the Secretariat prepares a draft Stage 1 peer review report of the assessed jurisdiction and sends it to the assessed jurisdiction for its written comments on the draft report. When a peer review report is finalized, it is sent for approval of the FTA MAP Forum and later to the OECD Committee on Fiscal Affairs (CFA)’ to adopt the report for publication.

For Stage 2, there are two steps or phases: i) approval of Stage 2 peer monitoring report of an assessed jurisdiction and ii) publication of Stage 2 peer review reports. More specifically, an assessed jurisdiction should within one year of the adoption of its Stage 1 peer review report by the CFA submit a detailed written report (Update Report) to the FTA MAP Forum.

The Update Report should contain (i) the steps that the assessed jurisdiction has taken or is taking to address any shortcomings identified in its peer review report; and (ii) any plans or changes to its legislative or procedural framework relating to the implementation of the minimum standard. Members of the FTA MAP Forum should also provide their comments on the Update Report provided by the assessed jurisdiction. Based on the Update Report submitted by the assessed jurisdiction and the input from the peers, the Secretariat will revise the Stage 1 peer review report of the assessed jurisdiction with a view to incorporate these updates in the Stage 2 peer monitoring report of the assessed jurisdiction. After adoption from the CFA, the Stage 2 peer monitoring report will be published.

Minimum standard peer review reports

The report is divided into four parts, namely:

  • Preventing disputes
  • Availability and access to MAP
  • Resolution of MAP cases
  • Implementation of MAP agreements

Each part addresses a different component of the minimum standard.

Overall, Israel worked to address most of the shortcomings identified in its Stage 1 peer review report.

Preventing disputes

With respect to the prevention of disputes, it was concluded that Israel meets the relevant elements of Action 14 minimum standard, as Israel confirmed it is able to provide roll-backs of bilateral Advance Pricing Agreements (APAs) in appropriate cases, although it did not receive any such request as from 1 January 2016.

Availability and access to MAP

The report also concluded that Israel meets the requirements regarding the availability and access to MAP under the Action 14 minimum standard. It provides access to MAP in all eligible cases. Israel has in place a notification process for those situations in which its competent authority considers the objection raised by taxpayers in a MAP request as not justified, which has been used in practice. However, this process is not yet documented, while Israel intends to do this in the future. Israel has issued clear guidance on the availability and the use of MAP. This guidance specifies the manner and form in which the taxpayer should submit its MAP request, but neither includes the contact details of Israel’s competent authority nor addresses the relationship between MAP and audit settlements.

Concerning the average time needed to close MAP cases, the MAP statistics for Israel for the period 2016-18 are as follows:

2016 - 2018

Opening Inventory 1/2016

Cases Started

Cases Closed

End Inventory 12/2018

Average time to close cases in Months*

Attribution/Allocation Cases






Other Cases












The average time taken for resolving MAP cases for post-2015 cases follows the MAP Statistics Reporting Framework. For computing the average time taken for resolving pre-2016 MAP cases, Israel used as the start date the date that Israel received notice of the case, either from the partner country or the request from an Israeli resident to initiate MAP, and as the end date, the date that the case was either resolved (agreement reached with other CA), or otherwise closed.

The number of cases Israel closed in 2016-18 is 100% of the number of all cases started in those years. During these years, MAP cases were on average not closed within a timeframe of 24 months (which is the pursued average for resolving MAP cases received on or after 1 January 2016), as the average time necessary was 31.24 months. This both concerns the resolution of attribution/allocation cases, as the average time to close these cases is 37.08 months and other cases with an average time of 28.47 months. As the average completion time for MAP cases has decreased from 33.60 months in 2016-17 to 22.58 months in 2018 and Israel has added additional resources to its competent authority in relation to attribution/allocation cases, Israel should closely monitor whether such addition of resources will be sufficient to ensure a timely, effective and efficient resolution of MAP cases. If this would not be the case, additional resources or further actions are necessary.

Resolution of MAP cases

Furthermore, Israel meets most of the other requirements under the Action 14 minimum standard in relation to the resolution of MAP cases. Its organization is adequate, and Israel does not use any inappropriate performance indicators to assess staff in charge of the MAP function. However, personnel of the tax administration directly involved in the adjustment at issue fully participates in competent authority meetings, which bears the risk that the competent authority function is not performed entirely independent from the approval or direction of such personnel concerning the resolution of MAP cases during such meetings.

Implementation of MAP agreements

Lastly, Israel also meets the requirements under the Action 14 minimum standard with respect to the implementation of MAP agreements. Israel monitors the implementation of MAP agreements. It has implemented all MAP agreements thus far and no issues have surfaced regarding the implementation throughout the peer review process. However, Israel has a domestic statute of limitations for implementation of MAP agreements, for which there is a risk that such agreements cannot be implemented where the applicable tax treaty does not contain the equivalent of Article 25(2), second sentence, of the OECD Model Tax Convention.


In a post-BEPS world, where multinational enterprises (MNEs) face tremendous pressures and scrutiny from tax authorities, the release of Israel's Stage 2 peer review report represents the continued recognition and importance of the need to achieve tax certainty for cross-border transactions for MNEs. While increased scrutiny is expected to significantly increase the risk of double taxation, the fact that tax authorities may be subject to review by their peers should be seen by MNEs as a positive step to best ensure access to an effective and timely mutual agreement process.


For additional information with respect to this Alert, please contact the following:

EY Israel, Kost Forer Gabbay & Kasierer, Tel Aviv

Ernst & Young LLP (United States), Israeli Tax Desk, New York



  1. See EY Global Tax Alert, OECD releases Israel peer review report on implementation of Action 14 minimum standard, dated 21 September 2018.
  2. See EY Global Tax Alert, OECD releases BEPS Action 14 on More Effective Dispute Resolution Mechanisms, Peer Review, dated 31 October 2016.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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