The court ruled that the NSO purchase scheme was a fraudulent transaction designed to evade taxes.

The Lod District Court rejected Q Cyber ​​Technologies’ appeal, finding that the scheme to acquire the Israeli company NSO and repay the loans used to finance the transaction was artificial and intended to avoid dividend tax on approximately $8.6 million.

The dispute concerned the purchase of NSO through the Israeli company Q Cyber ​​Technologies, which was financed by loans from its foreign parent company, OSY. According to the Tax Authority, had OSY acquired NSO directly, the transfer of approximately $86 million in profits outside of Israel would have been subject to a 10% dividend tax. The use of an Israeli company allowed the transfer of funds to be treated as a loan repayment.

Judge Avraham Gorman agreed with the government’s position and ruled that the company had failed to demonstrate substantial commercial reasons for the chosen transaction structure. The court noted that Q Cyber ​​Technologies’ actual business activity did not begin until approximately two years after the purchase of NSO, and the anticipated tax savings significantly exceeded the company’s taxable income in subsequent years.

The court ordered the company to pay the state 40,000 shekels in legal costs. The prosecutor’s office stated that the ruling confirms that tax planning cannot serve as a cover for a fictitious transaction whose primary purpose is tax evasion.