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84 INVESTMENT INCENTIVES AND TRADE ADVANTAGES 7.4. ENCOURAGEMENT OF CAPITAL INVESTMENTS IN THE TOURIST INDUSTRY It should be noted that the previous law benefits (both in the tax benefit track as well as the grants track) are relevant for hotels, accommodation facilities and other tourist attractions. It should be noted that since Amendment 60 to the Law (from 2005), only accommodation facilities meeting the "foreign residents accommodation" conditions are eligible for benefits under the Law. As a rule and in order to comply with the above, at least 25% of overnight stays in an accommodation facility must be overnight stays by foreign residents. This condition does not apply to tourist attractions. According to law, benefits may be claimed on the construction or expansion of a "tourist facility for overnight stay". The legislator gave a distinction for the meaning of the term "tourist facility for overnight stay", stipulating that such a facility must be : "A structure comprising 11 or more rooms, providing overnight services to guests passing by and for fixed periods of time, together with accompanying services including catering, entertainment and leisure services". From the above, it emerges that a wide range of overnight accommodation services and other facilities are eligible for the benefits provided under the Law. Thus, one may easily determine that hotels, motels, guest houses and even hostels are eligible for such benefits, provided they fulfill the condition of the number of rooms stipulated by law. We should also mention that the map for priority regions applicable to tourist facilities differs from the map for priority regions applicable to the industrial sector. Thus, and in regard to hotels, it was determined that Development Region A includes, inter alia, the Western and Upper Galilee, around Lake Kinnereth, Nazareth, Haifa, along the Carmel Shore, Nethanya, Ramle, Jerusalem and Jerusalem Corridor, and the Southern Region excluding Eilath and the Dead Sea. 7.4.1. investment Grants An entrepreneur wishing to establish an ‘overnight tourist facility’ is entitled to an investment grant and a capital grant, which vary according to the facility’s location. Investment grants vary from 10% - 24% of the entrepreneur’s investment expenses, less land costs. BDO Israel
BDO Israel DOING BUSINESS IN ISRAEL The investment grant is not automatically offered; the entrepreneur must submit a detailed preliminary application to the Investment Center Management at the Ministry of Tourism. Based on established criteria, the application should address the various aspects to be considered by the Ministry (planning, minimum accommodation standards, etc.). In order to obtain the grant, the Ministry must issue a “letter of approval” for the plan. It should also be noted that the entrepreneur must submit the plan prior to proceeding with the actual investment, as grants are not approved “retroactively” on capital already invested. In addition to the said grants, the regulations prescribe a number of tax benefits for approved tourist facilities, the principal one of which, in our opinion, is accelerated depreciation on an investment in a tourist facility structure. 7.4.1.1. Tax Benefits Track for Overnight Tourist Facilities As mentioned earlier, the tax track applies only to “overnight tourist facilities” and not to tourist attractions. Furthermore, this track does not require the authorities’ prior approval as it applies automatically, on compliance with the conditions prescribed by law. Legislation prescribes a number of conditions, beyond “foreign residents accommodation” which, on fulfillment thereof, entitle the owner of the facility to claim tax benefits. The principal conditions for this are: a. The facility must be under the ownership of an Israeli company not fiscally “transparent” for tax purposes. b. To erect or widen the hotel, capital had been invested there in a minimum amount prescribed by law. Under the tax benefits track, the owner of the facility is entitled to the following: a tax exemption on increase in turnover (deferring the tax until profit distribution) - currently 10 years exemption in priority Region A, 6 years in priority zone B and two years exemption in the rest of the country; accelerated depreciation and reduced tax rates (Tax at shareholders level due to receipt of dividends is generally 15%). Alternative track available In Priority region A, with a final 11.5% tax on undistributed profits at Company level on increase in turnover and (with no further taxation at the company level with profit 85
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PREFACE This publication has been p
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7. INVESTMENT INCENTIVES AND TRADE
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8 THE ISRAELI ECONOMY IN 2010 The I
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1.2.4. Fiscal Developments 10 THE I
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12 THE ISRAELI ECONOMY IN 2010 1.2.
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14 THE ISRAELI ECONOMY IN 2010 Comp
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16 ISRAEL - GENERAL OVERVIEW Israel
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2.4. ISRAEL’S CURRENCY 18 ISRAEL
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Legal holidays in 2010 and 2011 are
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22 OVERVIEW OF ISRAEL’S HIGH-TECH
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OVERVIEW OF ISRAEL’S HIGH-TECH IN
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32 BUSINESS STRUCTURE The Companies
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Page 38 and 39: 36 BUSINESS STRUCTURE recommendatio
Page 40 and 41: 38 BUSINESS STRUCTURE TASE regulati
Page 42 and 43: 40 BUSINESS STRUCTURE ♦ Non-profi
Page 44 and 45: 4.2.2. Prerequisites 42 BUSINESS ST
Page 46 and 47: 44 BUSINESS STRUCTURE As mentioned
Page 48 and 49: 46 BUSINESS STRUCTURE 4.3. INSURANC
Page 50 and 51: 5.1.2. Distribution of Employees 48
Page 52 and 53: 50 BUSINESS ENVIRONMENT As of Janua
Page 54 and 55: 5.2. ANTITRUST LAW 52 BUSINESS ENVI
Page 56 and 57: 5.3. INTERNATIONAL TRADE 54 BUSINES
Page 58 and 59: 5.4. TRADE AGREEMENTS 56 BUSINESS E
Page 60 and 61: 5.5. PROPRIETARY RIGHTS 58 BUSINESS
Page 62 and 63: 60 ACCOUNTING AND AUDITING PERSPECT
Page 76 and 77: 74 INVESTMENT INCENTIVES AND TRADE
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Page 110 and 111: 108 TAXATION (d) More than 50% of o
Page 112 and 113: 110 TAXATION 8.2.2.6. Dividends Rec
Page 114 and 115: 112 TAXATION (3) Location of fixed
Page 116 and 117: 114 8.2.3.4. Rental Income from Out
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Page 124 and 125: 8.3.4. Sale of Stocks 122 TAXATION
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Page 130 and 131: 8.5. TAXATION OF TRUSTS 128 TAXATIO
Page 132 and 133: 8.6.1. Definitions: 130 ♦ Israeli
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8.8.6. Real Estate Companies 134 TA
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8.10. TAX TREATIES 136 TAXATION As
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138 Dividends % Interest % TAXATION
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140 FOREIGN EXCHANGE CONTROL AND PR
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10.3. ISRAEL LAND ADMINISTRATION OF
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11.2. KEY FIGURES FOR DECEMBER 31,
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Example A NIS Example B NIS APPENDI
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APPENDIX 2 Industrial enterprises m
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Ministry of Justice 29 Tsalch Adin
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Israel - US Binational Industrial R
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BRAZIL Embassy of Israel S.E.S Av.
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ECUADOR Embassy of Israel Av. La Co
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IVORY COAST (COTE D’IVOIRE) Embas
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PANAMA Embassy of Israel Edificio P
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THAILAND Embassy of Israel Ocean To
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REPUBLIC OF THE FIJI ISLANDS Embass
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