ANNOUNCEMENT 05 Nov 2012In November 2012, the government of Israel announced altered domestic business conditions for foreign investors.
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Ernest & Young
On 5 November 2012, the Israeli government adopted the 69th amendment to the 1959 law for encouragement of capital investments. Under certain conditions, the normal tax of 25 percent can be reduced to a minimum of 6 percent. The corporate tax-relief is only available for 'Israeli companies classified as approved industrial enterprises' (Deloitte, International tax, Israel highlights 2012), not for foreign companies.
The main condition is a reinvestment of the firm profits (30- 50% of the earnings) into:
- industrial activities
- research and development
- assets used by the enterprise
- salaries of newly recruited employees.
'The purpose of the provisions was to encourage the Israeli companies to re-invest the profits in its Israeli enterprises and to expand its operations within Israel'. (Ernest & Young, International Tax Alert, 13 November 2012).
Due to the fact that only Israeli firms are entitled to benefit from this tax advantage, the measure discriminates against foreign commerical interests operating in Israel.