ADVANCED MANUFACTURING

Incentives

Incentives

1. Capital grants:

  • Grants are awarded of up to 20% of the amount of investments in fixed assets, production equipment or facilities. For investments in southern and northern regions an addition of up to 10% may be applied.

  • The plant must be registered as an Israeli corporate entity. The grants are approved by the Israel Investment Center at the Ministry of Economy and Industry.
  • The applications are reviewed thoroughly by the Israel Investment Center and “Approved Enterprise” status is granted at the conclusion of a review procedure that includes submission of a detailed business plan, subject to various considerations. Applications are reviewed and scored competitively based on several parameters that are periodically modified, such as innovation, labor intensity, level of wages, financial stability and socioeconomic profile of the location.
  • The company may not enjoy capital grants and employment grants simultaneously.

 

incentives2

2. Tax incentives:

"Priority Enterprise":

Companies entitled to the status of “Priority Enterprise” enjoy:

  • Corporate tax rate: 16% (7.5% if the company is established in a National Priority Area - NPA).
  • Dividend tax rate: 20%.
  • Accelerated depreciation.

Tax benefits must be approved by the Israel Tax Authority for each of the requested tax years. However, the approval is based solely on meeting the threshold conditions: 25% of annual sales turnover is derived from offshore transactions, and registration as an Israeli corporate entity.

״Special Priority Enterprise״:

This is a strategic track for companies that commit to highly substantial investment.

Eligibility:

  • Total annual income in Israel meets or exceeds NIS 1 billion (approx. $250 million). The company does not have to have this income when applying, though upon applying it will designate the time by which it should reach the aforesaid threshold. Reduced tax rates will apply once the threshold is met or in the next 3 years.

  • Consolidated (global) balance sheet meets or exceeds NIS 10 billion (approx. $2.5 billion).

  • Business plan will include at least one of the following:

• Investment in production equipment of at least NIS 800 million (approx. $200 million) in central Israel or NIS 400 million (approx. $100 million) in a National Priority Area over a three year period.

• Investment in R&D (one of the following):

  • Investment in preferred R&D sectors (that will be decided by a Committee of senior administrators), for each year during the period of the benefits, of at least NIS 150 million (approx. $37.5 million) more than the average amounts of investment in R&D in the period of 3 tax years preceding the tax year in which the threshold is met (in central Israel).
  • Investment in R&D, for each year during the period of the benefits, of at least NIS 100 million (approx. $25 million) more than the average amounts of investment in R&D in the period of 3 tax years preceding the tax year in which the threshold is met (in National Priority Area).
  • - If the average amounts of investment in R&D in the period of 3 tax years preceding the tax year in which the threshold is met is higher than NIS 500 million, the amount of the investment in R&D should be 150% of the investment written above.
    • Employment of at least 500 employees in central Israel or 250 employees in a National Priority Area.

Benefits:

  • Corporate tax rate: 8% (5% if the company is established in a National Priority Area).
  • Dividend tax rate: 15% (5% for the years 2017-2019).
  • Accelerated depreciation.

Approval process:

  • Committee of senior administrators would verify in writing that upon review of the business plan submitted, it is convinced that the priority enterprise will offer a significant contribution to the Israeli economy and national objectives.
  • Israel Tax Authority approval.

Innovation Box

This is a special track aimed at intellectual property (IP) based companies, in particular, technology companies.

Eligibility:

The company must invest at least 7% of its income in R&D, and include at least one of the following :

  • At least 20% of the workforce is employed in development;
  • A venture capital investment was previously made in the company;
  • Average annual growth over three years of 25% in sales or Employees.

Companies not meeting any of the above three conditions may still be considered as a qualified company under the discretion of the Israeli Innovation Authority in the Ministry of Economy and Industry.

Benefits:

  • Corporate tax rate on eligible income: companies with consolidated revenues of over NIS 10b (app. $2.5b): 6%, other companies: 12% (7.5% if the company is established in a National Priority Area).
  • Dividend tax rate on eligible income: 4%.
  • Capital gains (upon sale of IP): 6% for companies with consolidated revenues of over NIS 10b (app. $2.5b), (12% for other qualified companies).
  • Companies with consolidated revenues of over 10 billion NIS, will be given commitment to stability of the rates for at least 10 years under certain conditions.

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