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Check Point is locking horns with the Tax Authority over the fundamental question of whether money transferred to its overseas subsidiary for development and expansion is liable for taxation. The issue at hand involves taxes amounting to hundreds of millions of shekels.

Check Point, an Israeli company traded on the Nasdaq, enjoys benefits from the Israeli government under the law for encouragement of capital investment. The company has transferred huge sums to its Singaporean subsidiary in recent years, for investment in its development. The Tax Authority maintains that the transfers should be treated as dividends, which are subject to company tax.

Check Point says the transfers involve a straightforward investment of the company's profits in its subsidiary, which is exempt from tax. The tax assessment of hundreds of millions of shekels was issued to Check Point a few months ago. The firm has appealed the assessment, and legal sources describe the disagreement as a fundamental one, which may have to be decided in the courts, unless the parties reach some other solution.

The Tax Authority refused to comment on the matter, citing confidentiality.