preface

7.3. DEPRECIATION
BDO Israel
DOING BUSINESS IN ISRAEL
The regular Depreciation rate determined in the income tax (Depreciation)
regulation-1941 ("Depreciation Regulation"). Under the Depreciation
Regulation, the main depreciation rates are as follows:
Asset Depreciation rate
Equipment and machinery (general) 7%
Electricity plant (equipment) 7%
Buildings 2%-4%
Computers 25%-33%
Electronic and Computing equipment 15%
Vehicles 15%
7.3.1. Accelerated Depreciation
Approved beneficiary and preferable enterprises are eligible for accelerated
depreciation on tangible assets, reaching 400% of standard depreciation rates
on buildings (not exceeding 20% per annum and exclusive of land), and 200%
on equipment. The tax authorities may allow increased rates of up to 250%, if
there is evidence of a high depreciation rate of equipment. This benefit is
available for a 5-year period from date of commencement of operation rather
than from purchase date of asset, and implementation thereof depends on the
type of each particular asset as well as various rules.
Furthermore, special provisions were enacted in the Law for the
Encouragement of Industry (Taxes), 1969 to grant favored enterprises
accelerated depreciation. The Income Tax (Inflationary Adjustments)
(Depreciation Rates) Regulations-1986, provides special depreciation rates to
industrial plants and hotels with regard to specific fixed assets. The regulations
are valid despite of the annulment of the Income Tax (Inflationary
Adjustments) Law. The terms "industrial plant" and "industrial company" are
defined in the Law for the Encouragement of Industry (Taxes). An ''industrial
company'' is defined as "a company resident in Israel deriving at least 90% of
its income in a tax year from an ''industrial plant'' owned by it". An ''industrial
plant'' is a term which applies to companies engaged primarily in production.
The regulation offers 5% depreciation for buildings owned industrial
companies, which function as industrial plant.
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