Shipping 2026

ISRAEL Law and Practice Contributed by: Joseph Sprinzak and Rahel Rimon, J.SPRINZAK

8. Ship-Owners’ Income Tax Relief 8.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies Israeli shipping companies are subject to the same corporate tax regimes as other companies in Israel, and are not subject to any special regulation or legis - lation. Incentives are, however, provided to shipping companies in terms of amortisation, and seafarers are provided with incentives in terms of income tax deductions. 9. Implications of Non-Performance, IMO 2020, Trade Sanctions and International Conflict 9.1 Force Majeure and Frustration Israeli legislation does not contain a definition of the term “force majeure”. Accordingly, when consider - ing non-performance of contractual obligations, the Israeli courts always look first at the construction of the contract and the intention of the parties. Force majeure in shipping contracts usually relates to wars and hostilities, natural disasters such as hurricanes and other matters outside the control of the parties. When considering the construction of the clause, the courts will also take into account the foreseeability of the event. Even if a particular event does not fall within the definition of force majeure, it is possible that in the appropriate circumstances the court would consider the shipping contract to be frustrated. In this regard, the Israeli courts have held that “war” per se in Israel does not frustrate a contract governed by Israeli law. It is highly likely that the on-going Russia-Ukraine war would also not be considered a frustrating event by the Israeli court in relation to a contract governed by Israeli law, in light of the foreseeability of the hostile activities. Section 18 (a) of the Israeli Contracts (Remedies for Breach of Contracts) Law 1970 provides that, where the breach of contract is the result of circumstances that at the time of making the contract the person in breach did not or could not know or foresee, and which they could not have avoided, and the perfor -

mance of the contract under these circumstances is impossible or fundamentally different from what was agreed between the parties, the breach will not give cause for enforcement of the contract or a right to compensation. The outcome is termination of the con - tract. The breaching party is not required to pay com - pensation; however, by virtue of Section 18 (b) of the law, they must return the moneys or goods received from the innocent party. 9.2 Enforcement of the IMO 2020 Rule Limiting the Sulphur Content of Fuel Oil The State of Israel adopted new national regulations for the prevention of air pollution from ships, which took effect on 23 February 2023. These regulations reflect the Regulations to Annex VI of MARPOL. The new regulations adopt low-sulphur limits at berth, similar to the requirements in EU member states, based on an EU Directive. The regulations require ships to change to 0.1% low-sulphur fuel as soon as possible, but not more than one hour after arrival/ before departure to/from port (pier or anchorage), and to maintain proper records in the sulphur record book. Ships equipped with an exhaust gas cleaning system (EGCS; scrubber), in accordance with IMO guidelines, which has been approved by the flag state, may use it within the port limits. These ships will not be required to use compliant fuel as stipulated in the Regulations. Wash water from EGCS may not be discharged over - board within port limits. Israel has also stipulated in the Regulations provisions limiting volatile organic compound (VOC) emissions in its ports. The Regulations define what is considered as a VOC and to which ships the Regulations shall apply. A 2016 task force funded by the Ministry of Environmental Protection recommended a number of measures to reduce pollution in the marine sector at both the Haifa and Ashdod ports. 9.3 Trade Sanctions In Israel, issues of trading with the enemy are governed by the Trading With The Enemy Ordinance, which was enacted during the British Mandate in 1939.

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