Israel Lines Up New Tax Incentives For Foreign Investors

by Lorys Charalambous, Tax-News.com, Cyprus

08 September 2004

The Israeli government is lining up proposals to encourage foreign investors to set up business operations in the country, with a package of new tax incentives, reports have indicated.

According to a government source quoted by Dow Jones Newswires, amendments to the country’s Capital Investments Encouragement Law will give prospective investors three options in terms of tax incentives.

The first of these would provide firms investing more than $100 million a ten-year exemption from Israel’s 36% corporate tax rate. Exemption from taxes on dividend payouts would also remain in place under this plan.

The second option will enable firms investing less than $100 million to take advantage of a reduction in corporate tax to 10%, with dividend taxes unlikely to exceed 15%.

Meanwhile, the third option retains incentives offered under existing legislation where eligible companies are given grants equal to 24% to 32% of capital invested in a plant constructed in Israel. Additional tax breaks will last for up to seven years. Corporate tax under this scheme is charged at 10% to 15% with dividend tax charged at 15%.

Firms using the first two options will be required to earmark 20% to 25% of production for export, according to the report.

The proposed amendments are expected to receive parliamentary approval before the end of the year.

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