Israel foreign Investments incentives
Israel tries to assist export industries and industry in development areas.
The support is offered, in principle, according to the following categories:
1) Research and Development
The assistance is granted to Israeli-owned industries and to industries owned by residents of others countries.
In certain cases, particularly when, in the case of an approved enterprise, there are special benefits for overseas residents, according to their holding in the corporations.
ASSISTANCE, RESEARCH AND DEVELOPMENT (R & D)
The Chief ScientistR&D proposals that are export-oriented and have been approved by the Chief Scientist of the Ministry of Industry and Commerce, are entitled to a grant of up to 50% of the R&D expenses.
The grant is repayable in the future as royalties on sales.
European Union R&DIsrael is the only non European country which participates in the 6th frame work program of R&D by the EU.
Israeli companies and organisations sharing R&D with European bodies can get grants of 50%-100% if the R&D costs.
Israel Start -up IncubatorsThe chief scientist of Israel supports R&D projects which have export marketing potential. The assistance is given for the first 2 years of the incubator, including finding financial resources, consulting etc.
The BIRD FundThis a joint bi-national fund of the United States and Israel that supports R&D projects common to both nations.
Similar bi-national funds exist with France, Germany, Holland and others.
Another fund is the TRID Fund that assists joint programs of Israel, Jordan and the United States.
Technological Hothouses: www.incubators.org.il Tel:972-3-5103941 Fax:972-3-5173734
The BIRD Fund: www.birdf.com Tel:972-3-6470710 Fax:972-3-6498341
Investment AssistanceIsrael is interested in encouraging economic initiative in order to increase export, development and the creation of jobs in development areas away from the center of the country. To this end, development areas have been defined that are known as Development Areas A - B. with Area A consisting of remote settlements that are entitled to greater benefits that those in Area B.
An investor who meets the requirements of the Investment Center may have his enterprise defined as an "Approved Enterprise" that is entitled to various benefits.
The benefits granted are in the main to industrial corporations and the hotel business. The benefits are concentrated on 2 tracks.
1. The grants track
2. The alternative track - tax relief or exemption (tax track):
The tax track is divided into 3 sub tracks:
-The alternative track.
-The improved track(green track).
-The strategic investment track.
The Grants TrackThe grant is given for an investment in the fixed assets of the approved enterprise at the following rates:
|Development Area A||Development Area B|
The Alternative Track (Tax Track)This track grants complete exemption from corporation tax.
The number of years for which the exemption is granted depends on the area of the investment.
|Area||Number of years exemption|
|Center of the Country||2|
An additional benefit is a reduction in corporation tax for a number of years after the years indicated in the table have expired.
The Improved Track (Ireland Track)The tracks relates to investments in Israel's area A.
The tax benefits are:
|reduced corporate tax||dividend tax|
The Strategic TrackStrategic investors in Israel, investing a minimal sum of IS 600 millions, depending on the area, get exemption from corporate tax and dividend tax for up to 10 years.
Corporations with Overseas InvestorsWhen the holdings of overseas investors in the capital formation of an approved enterprise amount to at least 25%, there are a number of additional benefits.
|Percentage Held by Overseas Investors||Rate of Corporation Tax||Tax Rate on Dividend|
|49% - 73%||20%||15%|
|74% - 89%||15%||15%|
|90% - 100%||10%||15%|
Israel Exemption from foreign currency linkage for overseas residentsAs a result of the changes in the rate of exchange of the Israeli shekel to world currencies, there is usually a shekel income which is the difference between the value of the original amount invested by the overseas resident (in shekels) and the value of the (shekel) investment at later dates.
The tax laws in Israel grant a number of exemptions to overseas residents on these differences in the rate of exchange:
1. Exemption from a rise in the rate of exchange on the foreign currency deposits of the corporation that are derived from the payment of the overseas resident on account of the purchase of stock in the corporation.
This is when more than 50% of the rights in the corporation are held by overseas residents.
2. Exemption from currency exchange differentials on a loan given to the overseas resident.
3. Exemption on the money that the overseas resident receives under a loan insurance policy against changes in the rate of exchange.
The exemption refers to the principal of the loan.
Israel Real Estate Purchases and Investment - Legal RestrictionsIn Israel, as distinct from other countries, there are no legal restrictions on your real estate purchases, whether as an individual or as a limited company.
The same is true of investments in corporations. There is no restriction on the type of industry in which you may invest neither is there any restriction on the percentage held.
As an overseas resident, you can set up a business of any sort whatsoever in which you hold 100% of the control.
Israel Investments in SecuritiesThere is no legal restriction on an investment on the Israeli Stock Exchange, whether as an individual or as a limited company.
Nevertheless, it is important to point that if investing on the Israeli Stock Exchange as an individual and not as a limited company, all your income in Israel will be tax-exempt.
Israel Bank LoansAs an overseas resident, you can approach any bank in Israel and obtain terms for financing as would an Israeli resident, without restriction.
Here too it is important to point out that there is no need to bring any minimum starting capital to persuade the bank of your financial capability, you can indeed be content with guarantees and collateral as would a normal Israeli citizen.
Note: You can find additional data on Israel's investment incentives in www.investinisrael.gov.il