beps- israel innovation box

ISRAEL’SINNOVATIONBOX AN UNPRECEDENTED OPPORTUNITY

FOR MULTINATIONAL COMPANIES

Israel’s diverse open market economy has a proven record of resilience and sustained competitiveness in the face of global economic crisis. Israel’s anchored banking system, elastic labor market and seasoned policy makers are well positioned to protect investors’ interests throughout turbulent global market conditions.** Israel is ranked 6th in Strength of Investor Protection by The World Bank

Israel’s economy is one of the strongest in the world, boasting positive and steady growth for over a decade.

-5.25

-1.75

-3.5

-0.0

1.75

3.5

5.25

7.0

2013 20142007 2008 2009 2010 2011 2012

Israel European Union United Kingdom United States

GDP GROWTH RATE (%)

Source: The World Bank

SECURE IN ISRAEL

Positive Growth Rate— Resilience toExternal Shocks

Only in Israel

HIGHESTConcentration of

Engineers in the World

Source: Global Creativity Index 2010 0

20

40

60

80

100

120

140

ISRAEL UNITED STATES

ENGINEERS PER 10,000 PEOPLE

4 | ISRAEL INNOVATION BOX

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Noted in Israel

12Nobel Prize Winners

Israeli ScientificInstitutions are

Ranked Topin the Worldfor Quality.

Noted in Israel

No.3In the World –

Scientific Infrastructure

Source: IMD 2015

Written in Israel

No.4In the World – Science

& Technical Journal Articles

Source: The Global Talent Competitiveness Index,

2014Canada 22,132

Sweden

Australia

Israel

Finland

Switzerland

New Zealand

Denmark

24,831

22,375

25,722

25,088

28,335

27,454

29,239

NUMBER OF SCIENTIFIC AND TECHNICALJOURNAL ARTICLES PER MILLIONPPP$ GDP / 2011


Invest in Israel

No.2In the World –

R&D Investmentas % of GDP

Source: OECD

R&D INVESTMENT AS % OF GDP

USA

OECD

2.74%

2.38%

Austria

Denmark

Finland

Sweden

Israel

Japan

Korea

3.10%

3.05%

3.17%

3.16%

4.11%

3.59%

4.29%

Origin In Israel

50%Of Global

Low-Pressure IrrigationSystems

Created In Israel

DISK ON KEY

Mobile Storage

Invented In Israel

PILL CAMFirst Ingestible

Endoscopy Camera

Powered In Israel

MILLIONSOf Cardiovascular

Stents

FabricatedIn Israel

THE BESTThe World’s Top

Digital3D Print

Technology

DevelopedIn Israel

WAZENavigation

System

ConceivedIn Israel

1000+Innovative StartupsPer Year

ImaginedIn Israel

KINECTGesture

RecognitionSystem

ManufacturedIn Israel

BILLIONSOf Intel

ComputerProcessors

A central issue within the OECD BEPS recommendations is the issue of IP registration location. The essence of guidelines on this issue is that intercompany remuneration of the IP owner should be in line with the locations of its actual functions, assets and risk profile. It is widely agreed that multinationals are currently evaluating their global operations in a post-BEPS world, seeking to align ownership and control over intangibles with value-creating functions. Since Israel is home for many of the value-creation activities of global companies, the combination of the new Innovation box with the already thriving innovation ecosystem creates a strong value proposition for multinationals – both for those who already have a presence in Israel and those considering it. The Israeli government strongly believes that the BEPS recommendations are an opportunity for multinationals operating in Israel, and is determined to take the necessary steps to facilitate this opportunity. Israel is launching a new IP tax regime, as part of the upcoming state budget.

WHAT IS BEPS?

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INNOVATION BOX PROPOSALIP INCENTIVES

* The Innovation Box would be in addition to already existing tax incentives presented on the following page

CORPORATE INCOME TAX

6% / 12%OVER/UNDER$2.5B GLOBAL

TURNOVER

4%DWHT ON

DISTRIBUTION TO A FOREIGN COMPANY

DIVIDENDSCAPITAL

GAINS/EXIT TAX(UPON SALE OF IP)

6% / 12%OVER/UNDER$2.5B GLOBAL

TURNOVER


Competitive industrial enterprises that are listed in Israel are entitled to preferred corporate tax rates, as follows:

• Companies located in Development area A could be entitled to a 9% reduced corporate tax.

• Companies located in other areas can enjoy a 16% corporate tax.• In both areas, additional dividend tax reductions might also apply. • Companies defined as special preferred industrial enterprises are entitled to a

further reduction: a 5% corporate tax in Development Area A and 8% in the rest of the country. Following the Innovation Box Proposal, the minimum required annual revenue from local activity was reduced to NIS 1 billion and the minimum requirement for consolidated balance sheet revenue was reduced to NIS 10 billion. In addition, the dividend withholding tax rate on distribution to a foreign company was reduced to 5%.In addition to the tax incentives, Israel offers grants in various areas:

• Grants of 20% of the approved investment, covering investments in fixed assets (e.g. equipment, buildings, machinery etc.) and up to an additional 10% for enterprises located in Negev

• Employment grants – 20-30% of the salary cost for additional employees• R&D grants – 20-50% of total eligible R&D expenditure• Vocational training grants for OJT programs

* In some cases a company may be eligible for more than one grant program

EXISTING TAX INCENTIVES

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MUL

TIN

ATIO

NAL

CO

RPO

RATI

ON

S LO

CATE

D IN

ISRA

EL*

*The above is a partial list of approximately 270 Multi-National Corporations operating in Israel

The Foreign InvestmentsAnd IndustrialCooperation Authority

Direct [email protected]+972 2666 2405

investinisrael.gov.il

beps- israel innovation box

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