Doing Business in Israel 2014

Doing business in Israel 2016
PREFACE
Crowe Horwath (Israel), an independent member of Crowe Horwath International
in Israel, has prepared this profile of Doing Business in Israel 2016. This profile is
designed to provide information on a number of subjects important to those
contemplating investing or doing business in Israel.
This guide is one of a series publication issue by Crowe Horwath (Israel) to clients
and professional staff, and may be obtained from by contact Crowe Horwath (Israel).
Doing Business in Israel 2016 has been designed for the information of readers.
Whilst every effort has been made to ensure accuracy, information contained in this
booklet may not be comprehensive and recipients should not act or rely upon it
without seeking professional advice.
Crowe Horwath (Israel) Doing business in Israel 2014

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CONTENTS
1.
Introduction
1.1
1.2
1.3
1.4
1.5
1.6
Geography
Population
Political System
Languages
Currency
Economy
2.
Business Entities and Accounting
2.1
2.2
2.3
2.4
Companies
Branches
Partnerships
Audit and Accounting Requirements
3.
Finance
3.1
3.2
3.3
Exchange Control
Sources of Finance
The Law to prevent Money Laundering
4.
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6
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10
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Investment Incentives
4.1
4.2
4.3
4.4
4.5
General
Law For Encouragement Of Capital Investment
Tourism Project
Tax benefits for building for rents
Research and Development Support
5.
Employment Regulations and Social

Security Contributions
5.1
5.2
5.3
Work Permits
Trade Unions and Worker Councils
Labor Related Costs
Crowe Horwath (Israel) Doing Business in Israel 2016

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6.
Taxation
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
News and Updates

Income Tax
Capital Gains Tax
Benefits and Exemptions
Employee Stocks/Options Plan
losses
Administration
International Taxation
Value Added Tax (VAT)
Other Taxes
Real Estate Taxes
7.
Appendices
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Withholding Taxes on Dividend Payments

Withholding Taxes on Interest Payments
Withholding Taxes on Royalty Payments
VAT: Zero Rating and Exemptions
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Crow e Horw ath (Israel) Firm Profile

Crow e Horw ath (Israel) International
Division
65
68
Executive Summary
Approach to Audit
Our Tax Approach
Our Team Approach
Firm Code
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79
81
88

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Article 1: INTRODUCTION
1.
Introduction
1.1
1.2
1.3
1.4
1.5
1.6
Geography
Population
Political System
Languages
Currency
Economy
Israel-European Union Agreements

Israel-USA Free Trade Agreement
Israel-OECD Membership
Labor force
Inflation

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1.1.
Geography
Israel, lying on the eastern seaboard of the Mediterranean Sea, bordered by Lebanon on
the North, Syria and Jordan on the East and Egypt on the South. Israel also borders the
areas controlled by the Palestinian Authority. Excluding the Gaza Strip and the West
Bank, but including the Golan Heights, Israel has an area of approximately 22,000
square kilometers (8,500 square miles) of which two thirds is desert (the Negev).
The major urban centers are Jerusalem with a population of approximately 815,000
people, the metropolitan area of Tel Aviv with 415,000 and Haifa with 272,000 people.
The greater part of the country is either hilly or arid. The climate is characterized by two
sharply contrasting seasons a dry hot summer from April to October followed by a wet
winter from November to March. The average annual rainfall varies from barely 40 mm.
(1.6 in.) in Eilat in the south to over 800 mm. (32 in.) in the Upper Galilee in the north.
The coastal area has a Mediterranean type climate. Average temperature range from
50C (410F) in Jerusalem in the winter to over 400C (1040F) in Eilat in midsummer.
1.2.
Population
Since the state's independence in 1948, Jewish immigrants from all over the world have
been settling in Israel. Israels population has increased from 870,000 people in 1948, to
about 8 million today. This figure consists of approximately 75% Jews with the remaining
25% comprising Moslems, Druze, Christians and others.
1.3.
P oliti cal S ys t e m
Israel is a secular democracy, where General Elections are held every four years to elect
120 Knesset (the Israeli Parliament) members. Every Israeli citizen as of age 18 is
eligible to vote, and be elected as of age 21. The elections are based on a system of
proportional representation of party lists.
The Israeli "head of government" is the Prime Minister who is the leader of the party that
holds the most seats in the Knesset.
1.4.
Languages
The formal languages are Hebrew and Arabic. Hebrew is the main language throughout
Israel.

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1.5.
Currency
The monetary unit used throughout Israel is the New Israeli Shekel ("NIS"), divided into
100 Agorot. The average exchange rate in 2015 was USD 1 = NIS 3.89
1.6.
Economy
A mixture of private enterprises and Government controlled enterprises characterizes

the Israeli economy.
Private enterprises are the largest industrial manufactures, though the public sector has,
for reasons related to the history of the country, invested heavily in some of the largest
enterprises in the country. State-owned corporations provide public utilities, such as
electricity, water supplies, and railways. However, concurrent with international trends
and local priorities the government is now committed to and is implementing a program
of divestment and privatization. In the recent years the Government sold most of its
interests in banks, the national telecommunications system ("Bezeq") and the national
airline corporation ("El-Al"). Several government-controlled companies are quoted on the
Tel Aviv Stock Exchange.
Israel natural resources includes minerals such as Potash, Phosphates, Bromine and
Salts, found in the Dead Sea and in the surrounding area, and natural gas and oil that
where discovered in the territorial water of Israel in the recent years.
The most important industries are Hi-Tech industries, tourism, Bio-Tec industries, and
production of precision instruments, chemicals, pharmaceuticals, textiles.
Israel has entered into several trade agreements in order to strengthen its position in the
international markets. The most significant agreements are the Free Trade Area, with
the European Union, Free Trade Area with the United States and Free Trade Area with
the European Free Trade Association States (EFTA). The agreements with the
European Union, the United States and the EFTA countries place Israel in the unique
position of being a Free Trade Area partner with the worlds main economic regions.
Thus, Israel is able to bridge countries that do not have mutual agreements, provided
that the products meet the rules of each agreement. In addition, Israel has signed Free
Trade Area agreements with Canada and Turkey.
Israel-European Union Agreements
In 1975 Israel and the EU signed an agreement providing an establishment for a Free
Trade Area for industrial and some agricultural products. According to the agreement,
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and subject to rules of origin, Israels industrial exports to the EU are exempt from
customs duties and other import restrictions. For its part, Israel has likewise eliminated
all duties on industrial imports from the EU.
In 2010 Israel and the EU signed on a new agreement in the domain of agricultural and
processed foods, in which export of agriculture to EU will be also exempt from customs
and duties.
In 2012, Israel and the EU signed on an "Open Sky" agreement in which Israel will
increase its flights to EU and vice versa, in order to reduce the flight prices.
In 2014 Israel and the EU signed on an agreement that combine Israel in the "Horizon
2020" project concerning innovation and research development.
Israel-USA Free Trade Agreement
In 1985 the Governments of Israel and the U.S.A. signed a Free Trade Agreement. This
agreement was fully implemented on January 1, 1995. The agreement, subject to rules
of origin (which are different from those of the European agreement), eliminates all
import duties and trade restrictions between the two countries.
Israel-OECD Membership
As from may 2010, the Organization for Economic Co-operation and Development
(OECD) accepted Israel as full member in the organization.
Labor force
The labor force is approximately 3.6 million people, with women comprising 47% of
employees. Following the economic slow-down and the waves of immigration since
1989, unemployment was at a high of approximately 10% of the labor force in December
2002, and decreasing gradually towards 6%.
Inflation
The rate of inflation has been in the range of 1% to 3% for the last few years. In 2015 the
inflation rate was -0.1%.

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Article 2: BUSINESS ENTITIES AND
ACCOUNTING
2.
Business Entities and Accounting
2.1
Companies
2.1.1
Private Companies
2.1.2
Public Companies
Branches
Partnerships
2.2
2.3
2.4

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Doing Business in Israel 2016

2.1.
Companies
The most common form of business entity in Israel is a limited company with shared
capital. The Companies Law governs the activities of the companies.
A company can be either limited by shared capital or by guarantee, or unlimited, in which
case its members do not have any ceiling to their liability.
There are no requirements as to nationality or residency of shareholders and directors of
companies.
In order for a company to be considered incorporated, it should be registered with the
Company Registrar at the Ministry of Justice. Apart from other requirements, an
incorporated company should have Articles of Association. The Company Registrar
usually accepts the English language.
2.1.1.
Private Companies
A private company may have between 1 to 50 shareholders.
A private company must file an annual report with the Registrar of Companies,
which includes information regarding shareholders and directors but not
financial statements.
Annual financial statements, prepared according to generally accepted

accounting principles and audited by professionally qualified auditors, should
be presented at the shareholders annual meeting.
Shares and other securities should not be offered for sale to the public.
There may be restrictions, upon shareholders agreement, on the transfer of a

private companys shares.

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2.1.2.
Public Companies
A public company must have at least 7 shareholders, with no maximum

limitations.
There should not be any restrictions on the transfer of a public companys

shares.
If a public companys shares are traded on the Tel Aviv Stock Exchange
(TASE), the company is required to:
2.2.
Publish annual audited financial statements and quarterly unaudited (but

reviewed by a CPA) financial statements.
Appoint at least two directors who do not have any business or other
relationships with the company, known as Public Directors.
Appoint an audit committee, comprised of at least three directors, two of

whom are Public Directors.
Appoint an internal auditor.
File annual and quarterly reports to the Registrar of Companies, TASE

and the Security Authority.
Any offer to the public must be through a published prospectus
Make an immediate announcement of any major event
Branches
Foreign companies wishing to conduct business in Israel must be registered with the
Registrar of Companies and provide the Memorandum and Articles of Association, list of
directors and other required information. All documents can be in either Hebrew or
English.
2.3.
Partnerships
The Partnership Ordinance governs the activities of partnerships. If a partnership is

established for the purpose of conducting business in Israel, it can be either registered
with the Registrar of Partnerships at the Ministry of Justice or remain non registered.
Registration requires, among others, furnishing the Registrar of Partnerships with the
partnerships name, activities, address, partners etc.
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A partnership cannot comprise more than 20 partners.
A partnership may be general or limited.
A partnership does not have to file annual reports of any kind. Profit or loss
should be added to the partners financial reports or income statement.
2.4.
All companies are obligated under the Israeli Companies law to prepare audited annual
financial statements, drawn up in accordance with Generally Accepted Accounting
Principles (GAAP) and file them with the Companies Registrar. The financial statements
have to be audited by a certified public accountant.
As from 2007, the Israeli Accounting Standards Board (IsASB) has adopted the
International Financial Reporting Standards ("IFRS") for public companies. Public
companies, traded in the Tel-Aviv Stock Exchange are required to publish their financial
statements drawn up under IFRS. Small and Medium enterprises (SMEs) have the
option to use Israeli GAAP or apply IFRS. During July 2009, the IFRS for SMEs has
been introduced by the International Accounting Standard Board.
Commencing 2011, IFRS for SME's has been adopted as an alternative basis of
accounting for non-public companies, targeting 2015 as the year for a final decision for
this basis of accounting. As of January 2016, no decision to that effect has yet been
taken by the IsASB.
All businesses need to maintain proper books of accounts for taxation purposes and to
retain the accounting records and associated documents for not less than 7 years. All
companies must have their accounts audited by a certified accountant - statutory full
scope audited financial statements).

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Article 3: FINANCE
3.
Finance
3.1
3.2
Exchange Control
Sources of Finance
3.2.1
Banking
3.2.2
Stock Exchanges and Trading Facilities
3.2.3
Venture Capital Companies
The Law to prevent Money Laundering
3.3.1
No assistance to money launderers
3.3.2
No Tipping Off
3.3.3
Voluntary Disclosure
3.3

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3.1.
Exchange Controls
There are no exchange controls in Israel on inward or outward investment. Foreign

currencies can be bought and sold freely and there are no restrictions on the
maintenance of foreign currency bank accounts in Israel.
There are no limitations on the repatriation of profits from Israel.
3.2.
Sources of Finance
3.2.1.
Banking
The Israels central bank, the Bank of Israel, acts as banker to the Government. It is
responsible, inter-alia, for setting base interest rates through its Monetary Policy
Committee.
Overdrafts with fluctuating interest rates are the most commonly used facility for
financing working capital or for funding seasonally affected business. Technically,
overdrafts are repayable on demand.
Banks also offer short, medium or long-term loans. The repayment terms are negotiable
and the rate of interest may be fixed or variable. To obtain bank finance, the business
will normally be required to provide adequate security. Security will typically be in the
form of a fixed or floating charge over the business assets, as well as, in certain
circumstances, personal guarantees from the owners.
In addition to these traditional services banks offer various other financing arrangements
through subsidiaries or affiliates. These include installment credit, leasing, factoring and
invoice discounting and mezzanines finance.
3.2.2.
Stock Exchanges and Trading Facilities
The Tel Aviv Stock Exchange (TASE) provides a market for shares and other securities
issued by public companies and government bonds.
Trading in securities and raising capital from the public are regulated by the Securities
Law, under which the Security Authority was established to protect the interest of
investors.

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To become and remain listed, a company has to satisfy and abide by the extensive rules
established by the TASE and the Security Authority, which is independent from the Tel
Aviv Stock Exchange (TASE).
3.2.3.
Venture Capital Companies
For businesses that are not large enough to consider Stock Exchange entry but which
require equity or mezzanine finance, Venture Capital Companies can provide equity for
start-ups, for development or for management buy-outs.
Venture capital companies may also be a source of finance for a business that does not
have sufficient security to borrow from a bank. However, they may require a higher
return than a traditional bank.
3.3.
The Law to Prevent Money Laundering
Israel has joined the fight against the Money Laundering by enacting the Money
Laundering Law. This Law enables Israel to take an active role in the international fight
against money laundering.
On the 22 October 2014, the Israeli government confirms the conclusions of the "Loker
Committee" that was established in order to reduce the use of cash in the Israeli
economy.
The main purpose was to fight the undeclared capital ("Black Capital"), and the
laundering of money in order to enable "Real Tax" collection.
The benefits driven from reduction the use in case, are as follows:
1. Expanding the tax basis.
2. Reducing the competitive advantage of business which violates the law,
compared to those who follow the law.
3. Truth Tax collection.
4. Implement advanced method of payments.
5. Reduce criminal activities and laundering of money.

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The conclusions of the committee were as follows:
1. Limiting the cash transactions between individuals carrying on a business to
10,000 NIS (Instead of 20,000 NIS)
2. Limiting the cash transactions between individuals to 15,000 NIS (instead of
unlimited amount).
3. Limiting the possibility to pay off checks that were transferable more than once,
(up to 10,000 NIS). It was also recommended to prohibit transferring check
without beneficiary's name.
4. Starting using debit cards that are credited immediately and debit cards that can
be loaded.
On November 2015 the Israeli government confirms amendment 207, which allows the
Israeli Tax Authorities to transmit information to a foreign country according to an
agreement between the two countries.
3.3.1.
No Assistance to Money Launderers
Anti Money Laundering Law imposes certain identification and reporting obligations on
financial institutions, including banks, stock exchange members and money changers.
These institutions are required to positively identify anyone, either a person or a
corporation, requesting services such as opening of an account, change of ownership of
an account, or execution of certain transactions.
3.3.2.
No Tipping Off
To prevent money laundering the aforementioned institutions are also required to report
certain transactions to the authorities. These transactions fall into two categories:
Transactions which exceeds defined amounts.
Unusual transactions transactions which appear to be unusual in light of the

information the institution possesses - for example, a transaction whose aim
seems to be avoidance of the "size defined" reporting requirements or an
account whose holder seems to be operating on behalf of someone else, etc.

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3.3.3.
Voluntary Disclosure
The Israeli Tax Authority (hereby - ITA) released on 7 September 2014 a new
Voluntary Disclosure Program (hereby - "The Program") for unreported income and
assets, (which replaces the former 2005 and 2011 programs) and applies to all types of
unreported assets and income, whether offshore or domestic, passive income or income
derived from a trade or business.
The program consist two temporary programs in the following courses:
1. A procedure allowing anonymous applications ("the Anonymous Course).
2. An expedited procedure for taxpayers with funds not exceeding 2,000,000 NIS
provided that the estimated taxable income does not exceed 500,000 NIS.
(Hereby - "The Expedited Course).
This program is not available to taxpayers who are already subject to investigation by
the ITA, even a confidential enquiry, when they apply for the program. Is also not
available for funds derived from criminal activities.
Israeli taxpayers can apply for the general voluntary disclosure procedure until 31
December 2016. The Anonymous and the Expedited Courses are available until 30
June 2016.
Taxpayers who wish to regularize their tax situation and apply for the program must file a
request through their representative (lawyer, accountant or tax advisor).
The application should contain all relevant information on all unreported assets (offshore
or domestic) and their related income and gains, including passive income (capital gains,
interest, dividends, etc.) or active income (derived from a trade or business) gained in
the 10-year period preceding the application for the program.
Unreported assets and their related income and gains will be assessed by the tax
inspector who will calculate the principal amount of tax, late-payment interest and
penalties.
The main benefit of the program is the full relief from criminal liabilities relating to tax
avoidance for taxpayers.

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Article 4: INVESTMENT INCENTIVES

4.
4.1
4.2
4.3
Investment Incentives
General
Law For Encouragement of Capital Investment
Overview
4.2.1
Applicable of the Law
4.2.2
Location
4.2.3
The Grant Scheme
4.2.4
The tax benefits scheme
4.2.5
4.2.5.1 Preferred Corporation
4.2.5.2 Preferred Enterprise
4.2.5.3 Preferred Income
4.2.5.4 Tax benefits
4.2.5.5 Dividends from preferred enterprise
Tourism Project
The Grant Scheme
4.3.1
4.3.1.1
4.3.1.2
4.3.1.3
4.4
4.5
Accelerated Depreciation
Corporate Income Tax rates
Dividends
4.3.2
Tax benefit Scheme
Tax benefits for building for rents
Overview
4.5.1
The development of a novel product
4.5.2
R&D Support for a start-up company
4.5.3
R&D Support for Companies in Special Geographical
4.5.4
4.5.5
4.5.6
Areas
Royalty
"Engels" Law- for Investment in Research and
Development Companies

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4.1.
General
The state of Israel supports its investment initiatives by developing and granting a wide
range of incentives and benefits in order to achieve a favorable balance of trade,
improve revenues, maximize productivity in designated industrial sectors, ensure healthy
competition in the relevant markets and facilitate overall growth.
To attain these goals, Israel offers substantial benefits and concessions through a
number of laws and regulations, as summarized below. Special emphasis is laid on hightech companies and R&D activities, as considerable importance is attached to these
fields.
Furthermore, numerous programs have been formed, starting from grass roots, to
support the high-tech industry. Israeli companies may also be eligible for benefits from
international funds created as a result of cooperation agreements established between
the Israeli and foreign governments, including Canada, the United States, the European
Union, etc.
Additionally, to promote weak economic regions within Israel, differential benefits are
granted (A, B and Central Israel) - being substantially higher in the designated priority
regions (A, B) than in the center of the country.
Enterprises are however eligible for benefits anywhere they are erected, provided they
comply with the relevant criteria (see below).
Additionally, Israel grants foreign investors and major investments increased tax
benefits.

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4.2.
Law For Encouragement of Capital

Investments
(See "Doing business in Israel - 2010" to learn more about the Law prior the amendment No 68)
4.2.1.
Overview
The Law for Encouragement of Capital Investments (on this chapter will be referred by
"the Law") was originally introduced in 1959, in order to boost the Israeli economy by
attracting local and foreign investors to contribute capital investments to the Israeli
industry.
The Law's main goal is to amplify the attractiveness of the Israeli economy in the
international competition over local and foreign capital for investment and development.
Likewise, through the set of incentives prescribed by it, the Law promotes a more
geographically balanced distribution of the population across the country and
strengthening of the peripheral regions.
Traditionally, the law includes two main schemes of government incentives: the grant
scheme which allows up to 24% government's grant on qualified investments for
establishing or expending industrial enterprise at preferred areas; and the tax incentive
scheme.
At the end of 2010, the Knesset (the Israeli Parliament) had decided on the 68
amendment of the Law, which concludes an extensive reform of the Law, which would
be applied on income attributed starting January 1, 2011 (hereinafter will referred as "68
Amendment"). As studies have indicated inefficiency in the allocation of resources
according to the Law's provisions, and based on the conclusions of the professional
public committee appointed by the ministry of finance, government announced extensive
amendments in the Law. Outline below are some of the main changes:
Updating the Law's objectives in line with the changes that have taken place in
the Israeli economy characteristics, placing emphasis on encouraging
investments, generating added value in innovation and heightened
competitiveness of Israeli industry;
Allowing the Israel Investment Center flexibility to establish other support

schemes besides the existing schemes, for a range of investments, focusing on

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investments in human capital, and in line with industry characteristics at any
given time;
Prioritizing the peripheral regions through the grants scheme;
Simplifying the tax benefits scheme, establishing flat tax rates on all income of
"preferred companies" and giving preference to the peripheral regions by
lowering the reduced tax rate for companies in those regions;
Eliminating the distortions created through the concentration of resource

allocation in the tax benefits scheme, by preventing the grant of greater tax
benefits to foreign investors, and by excluding companies based on the
exploitation of natural resources, including petroleum and natural gas, and
other companies for which there is no room for granting incentives through tax
breaks, such as state-owned companies.
Customizing a dedicated tax track aimed at promoting the operation of huge

companies in Israel.
4.2.2.
Applicable of the Law
The Law applies to industrial enterprises which qualify as "International Competitive

Enterprise".
The definition of industrial enterprise includes enterprises who own Productive activities
as textiles, food, electronics, chemicals, pharmaceuticals, computer software,
biotechnology, nanotechnologies, etc.
The High-Tech industry, being a major growth engine of the Israeli economy, had been
promoted to the Law. In accordance, the definition of productive activity had also been
applied to developing of software programs and Research and Develop industrial
centers located in Israel. Industrial R&D for a foreign resident will be recognized as
industrial enterprise once approved by the Head of Industrial R&D Administration.
The Amendment No 68 excluded companies based on the exploitation of natural
resources as petroleum and natural gas from obtaining incentives under the Law. Stateowned companies had also been excluded from obtaining benefits under the Law.
Industrial enterprise could be approved either by the investment center or by the
Israeli Tax Authority.
In order to meet the International Competitive Enterprise rule, 25% of the enterprise's
revenues should be driven from exporting to large international markets.

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4.2.3.
Location
The government grants scheme is affected by the location of the company's activities.
Several regions in Israel have been declared National Priority Regions (Priority Area A),
among them:
The Galilee
Jordan Valley
The Negev
Jerusalem Areas which do not include in the Priority Area A are considered
under the Law "Other Areas"1.
4.2.4.
The Grant Scheme
An industrial enterprise located in "Priority Area A" fulfilling the terms of the Law, may be
eligible for grants to be calculated as percentage of the approved investment. The grants
may be 20% of the actual investments of the enterprise on the follow assets:
Buildings, machinery and other equipments (not including private vehicles)

owned by the enterprise and used according to the approved program (by the
Incentive Center).
Expenses made for land developing.
Expenses made for renovation of the building.
The grant scheme would only be applicable for enterprises located in Priority Area A.
Enterprises from other areas are not qualify for the grant scheme, but can be entitle for
tax benefits under the Law.
Under the amended law, applies for income accrued starting 2011, enterprises
complying with the requirements of the law may benefit simultaneously from both the tax
benefits (lower corporate tax rate as described earlier) as well as applicable nonrefundable grants (only relevant for Area A).
Before the Amendment No 68 to the Law, the country's regions were divided for 3 zones: Priority Area A,
Priority Area B and Other Areas. According to the amendment, Area B was cancelled. However, for the
purpose of incentives for Tourism Project (see below) all three areas are relevant.

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4.2.5.
The Tax Benefits Scheme
The Law prior to the Amendment No 68 determined differed tax exemption for a
"Beneficiary Enterprise". However, the exemption was concluded only for the growth in
the enterprise's revenue which was attributed to the extension of the plant2. The tax
exemption was concluded based on the location of the enterprise3.
Under the amended Law, all prior tax benefits schemes had been canceled. The
"Beneficiary Enterprise" was replaced with "Preferred Enterprise", as defined below.
Instead of differed tax exemption schemes, reduced flat tax scheme had been
introduced. Enterprises located in Priority Area A would be eligible for reduced
corporate tax of 9% on all preferred income. Corporate tax rate on other regions would
be 16%.
4.2.5.1. "Preferred Corporation"

Preferred Corporation is a legal entity which conducts all the following:
An Israeli company, which was incorporated under the law of Israel, and the
business of which is controlled and managed within Israel. The company may
not be transparent entity for tax purpose, as a family company, a transparent
company or a Kibbutz. Notwithstanding the above, registered partnerships
may be consider as Preferred Corporation provided all its partners are Israeli
companies which fulfill the above mentioned.
The corporation owns a Preferred Enterprise (as defined below)
The company must maintain admissible books and records and file any reports
required under Israeli Tax Law.
The company and its officers must be free of previous convictions on tax fraud
charges during the 10 years proceeding the benefits periods.
It should be noted that companies own factories and quarries for producing natural
resources (minerals, gas and oil), as well as governmental corporation, will be excluded
from the definition of "Preferred Corporation", and not be eligible for benefits under the
Law.
It is possible to be eligible for the tax exemption on all the enterprise's taxable income in case the
enterprise had fulfill the requirements of the Law from the first year income had been accrued (mainly
for R&D centers).
Under the Law before the 68 Amendment, Priority Area A was entitled for 10 years exemption. Priority
Area B 6 years. Other Areas 2 years.

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4.2.5.2. "Preferred Enterprise"
As mentioned, the tax benefits scheme would apply only on Preferred Income (as
defined below) of a Preferred Enterprise. According to the law, Preferred Enterprise
would be an industrial enterprise fulfilling the following terms:
The enterprise is competitive within the international market; and
The enterprise contributes to the Gross Domestic Product of Israel.
An enterprise will be deemed to have fulfilled this condition if it is one of the following:
Engaged mainly in biotechnology or nanotechnology, and obtained an approval

of the Head of Industrial R&D Administration;
At least 25% of its Preferred Income of the enterprise which was produced from
direct exporting to international markets; or
Engage mainly on the field of renewal energy.
4.2.5.3. "Preferred Income"

The Preferred Income would be determined as the gross income of a Preferred
Enterprise (not including discounts) which was produced or which accrued during the
course of business activities of the enterprise in Israel, as follow:
Income from products manufactured in Israel, including components

manufactured by subcontractors. Income derived from natural resources (Gas,
Mineral, Oil) would not be calculated as part of the Preferred Income.
Income from the sale of semiconductors manufactured by independent

subcontractors, as long as the IP belongs to the Preferred Enterprise.
Income derived from royalties for the use, or the right to use, a patent or knowhow which was developed in the Preferred Enterprise.
Income derived from industrial research and development made for foreign
resident, as long as an approval of the head of the R&D center had been
provided.
4.2.5.4. Tax benefits

Preferred Enterprise would be eligible for tax benefits for each tax year on which it has
fulfilled the 25% export condition.

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Corporate Income Tax of a Preferred Enterprise would be 9% in 2016, if the enterprise is
located on "Priority Area A", and 16% if it is located on other regions.
Tax Year
Priority Area A
Other Areas
Ordinary Tax Rate
2011
10%
15%
24%
2012
10%
15%
25%
2013
7%
12.5%
25%
2014
9%
16%
26.5%
2015
9%
16%
26.5%
2016
9%
16%
25%
4.2.5.5. Dividends from Preferred Enterprise

Dividend distributed from the preferred income would be taxed at 20% (Dividend
distributed to Israeli corporation is exempt from taxes.
Dividend distributed from exempt income would be taxed also at corporate tax rate (25%
at 2016).
4.3.
Tourism Projects
The law for encouragement of capital investments also applies on tourism enterprise.
Nonetheless, the incentives for tourism projects remained as prior to the 68 amendment.
"Tourism Enterprise" is defined as tourism facility which includes at least 11 hotel rooms,
and provides sleeping arrangements service and additional services as catering,
recreation and leisure. Unique Tourist attractions have also been included as Tourist
Enterprise.
4.3.1.
Grant Scheme
Tourist Enterprise which is located in Priority Area A will be eligible for non refundable
grant of up to 20% from its approved investments. Tourist Enterprise which is located in
the Negev Area will be entitled for 30% grants.

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Tourist Enterprise which is located in Priority Area B will be eligible for non refundable
grant of up to 10% from approved investments.
In addition to the grants, Tourism Enterprise would be eligible for the following tax
benefits.
4.3.1.1. Accelerated depreciation

Approved tourist enterprise may charge, at its request, accelerated depreciation on its
assets (including buildings) used for the purpose of producing the approved income, as
followed:
machinery and equipments 200% of the ordinary percentages that could be

charged;
Buildings 400% of the ordinary percentages that could be charged.
When proven that machinery and equipments had been used on double or more shifts or
been used in extreme conditions, Approved Enterprises may charge 250% of the
ordinary percentages that could be charged.
Grants received for expenses made for land development would not be taxed, but, for
the purpose of depreciation, the sum of the grant would be discharged from the cost of
the building.
4.3.1.2. Corporate income tax rates

Approved tourist enterprise located in Priority Area A would be exempt from tax
(deferred) for the first two years starting the first year the enterprise realized taxable
income. For the next 5 year the enterprise would be tax on the ordinary corporate tax
rate (25% on 2016).
Had the enterprise's shareholders are foreign residents the corporate tax rate would be
as followed:
When more than 49% but less than 74% of the enterprise's shareholders are
foreign residents the corporate tax rate would not exceed 20%.
When more than 74% but less than 90% of the enterprise's shareholders are
foreign residents the corporate tax rate would not exceed 15%.
When more than 90% of the enterprise's shareholders are foreign residents
the corporate tax rate would not exceed 10%.

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The two years tax exemption (deferred) would only be available for enterprise located in
Priority Area A.
4.3.1.3. Dividends
Tourism Enterprise which distributes dividend from its exempted income would be
charged on corporate tax regarding the exempted income.
Dividend distributed from the approved income would be limited to 15% tax rate as long
as the scheme approved before January 1, 2014 (unless relevant double tax convention
is in force).
4.3.2.
Tax Benefit Scheme
Tourism Enterprise would be eligible for extensive tax benefits if it prefers the tax benefit
scheme instead of the grant scheme. Tourist Enterprise not located on Priority Area A
could only be eligible for the tax benefit scheme and not be eligible for the grant scheme.
The tax benefits under this scheme are as followed:
Tourist Enterprise located in Priority Area A would be exempt from tax

(deferred) for 10 years starting the "Chosen Year". The enterprise may elect to
be charged with flat reduced tax of 11.5% instead of the deferred exemption
("Ireland Scheme").
Tourist Enterprise located in Priority Area B would be exempt from tax

(deferred) for 6 years starting the "Chosen Year".
Tourist Enterprise located in Other Areas would be exempt from tax (deferred)
for 2 years starting the "Chosen Year".
Tourism Enterprise which distributes dividend from its exempted income would be
charged on corporate tax regarding the exempted income.
Dividend distributed from the approved income from January 1, 2014 , would be limited
to 20% tax rate as long as the scheme was approved starting from January 1, 2014.
(Unless relevant double tax convention is in force).

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4.4 Tax benefits for building for rents
In order to encourage building apartments for rent, the law for encouragement of capital
investments determines several tax incentives for "building for rent".
1. According to the encouragement law- chapter 7, "Building for rent" is considered
a building that half of its territory is intended for rent, provided that its
construction was completed by July 31st 1988.
"A new building for rent" is consider a building that was confirmed after January
1st 2009.
An owner of a "New building for rent" is entitled to receive benefits if half of the
building territory is rented for residential purposes and the average period of
renting is 5 from 7 years since the end of the construction, and no apartments
were sold according to section 88 of the tax amendment regarding half of the
building before 5 years ends.
Tax benefits:
1.1
The Depreciation rate on a rental apartment (for residential purposes) is
20%.
1.2
The tax rate for selling the asset/rental payments will be 11% for
companies, 18% or less (in certain conditions) for Israeli company whose
shareholders are mainly foreign residents, and 20% if the owner is an Israeli
individual.
1.3
Exemption from appreciation tax if 12 month before or after the selling, a
new building for rent/ property was purchased for building purposes and several
conditions take place.
1.4
Tax rate for dividend from an approved enterprise is 15%.
2. According to the law for encouragement, "building for rent" is considered as a

building with at least 16 apartments used for living, and at least 70% of the
approved building is being rented for living.
Tax benefits according to this law are:
2.1
20% depreciation.

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2.2
Exempt from tax appreciation if the building was rented 10 years at least
and the buyer is committed to rent the apartment for another 15 years. In order to
enjoy the exemption from appreciation tax the building need to be rented for at
least 25 years.
4.5
4.5.1

Overview
The Office of the Chief Scientist (OCS) of the Ministry of Industry and Trade is
responsible for implementing government policy regarding the support and
encouragement of industrial research and development in Israel.
The variety of support programs provided by the OCS, have played a major role in
enabling Israel to become one of the most important centers for high-tech
entrepreneurship outside of the United-States.
4.5.2
The development of a novel product
A single or multi-year program that will provide know-how, processes or methods for the
manufacture of a new product or the major improvement in an existing one or a new
process or a major improvement in an existing process. The product must have a
sizeable potential for export sales.
The support is in the form of a conditional grant amounting to 30-50% of the approved
R&D budget.
4.5.3
Support by Grants for R&D of Start-Up

Company
A start-up company is defined as one whose R&D program is its first and only activity
and where the R&D staff is the sole source of financing.
The support is in the form of a conditional grant of 66% of the approved R&D budget up
to a maximum of $250,000 per year for up to two years. Any approved R&D expenditure
above $250,000 may receive a conditional grant of 50%. The R&D support includes
beta-site testing as well as patent registration

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4.5.4
R&D Support for companies in special

geographical areas
Any approved R&D program-taking place in Development Area A is entitled to a

conditional grant of 60% of the approved budget.
In any area delineated as Front Line the conditional grant amounts to 70-75% of the
approved budget with the higher figure for companies that also manufacture in that area.
4.5.5
Royalty
Any income derive from an R&D program that has enjoyed government support is liable
for the payment of royalties to the OCS. The royalty payments are based upon a
percentage of sales up to the repayment of the grant.
4.5.6
"Engels" Law - for Investment in Research

and Development Companies
Investments
in
Israelis
Research
and
Development
companies
(hereby:"R&D
companies"), that are in the first stages of research and development activity (the
"seed stage") represent a very high risk investment for the investors. These companies
which represent a significant part of Israeli industry, have difficulties finding investors,
and have difficulties finding alternative funding solution.
In order to increase the funding of these companies, Israeli equity investors in these
companies are entitled to expense their investment.
The Engel Law establishes that Israeli individuals that purchase stocks of qualified
companies will be eligible to expense the investment.
The law is in effect for eligible investments made beginning in 2011 until 2015 and the
maximum amount of the benefit is 5 million NIS for an individual investor in qualified
Company.
The law establishes that the eligible investments must meet three criteria in clause 20A:
1. Eligible investment
2. Period of benefit

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3. Target company
Eligible investment
An eligible investment is an individual investment in a target company, in any tax

year, in which the stock of a target company has been allocated in that year.
The expensing of the eligible investment will be allowed only for the investment of
the individual in an eligible company and not for funds that were transferred by a
corporation. These criteria is based on 2 conditions:
1.
the payment for the investment was transferred to the company
2.
The stock purchase by the investor in the target company, relates to the
same year of which the investment took place.
Period of benefit
The benefit period is a period of three tax years beginning in the tax year in which
the fund for the eligible investments, were paid.
The exact date during the tax year in which the funds were transferred, is not
relevant.
The benefit period relates to a specific investor with regards to a specific eligible
investment in the company. In case there are number of investors, each one of
them will have a personal investments period.
Target Company
The criteria for recognition as a Target Company are:
1.
An Israeli company.
2.
The Target Company has received approval by the Israeli Office of the Chief
Scientist of the Ministry of Industry and Trade for it's in Research and
Development activities.
3.
The Target Company shares are not registered for trade on Stock Exchange.
4.
At least 75% of the investment in the Target Company is utilized to fund its
research and development activities.
5.
At least 75% of the research and development expenses of the Target

Company during the benefit period were spent in Israel.
6.
In the first year of investment and in the succeeding year, the revenues of the
Target Company were not in excess of 50% of its research and development
costs.

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7.
The research and development cost incurred by the target Company were
spent for the promotion or development of its subsidiary.
8.
The research and development costs of the Target Company comprise at

least 70% of its company's costs.
Since this law was hardly used, an amendment to the law was received in which
a new course alternative to the existing one, was added, ("Beginning Company")
which offers the same tax benefit to the investors in such company .
This new course will be activated as a temporary provision as from January 1st
until December 31, 2019.

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5.
EMPLOYMENT REGULATIONS
AND SOCI AL SEC URITY
CONTRIBUTIONS
5.
Employment Regulations and Social

Security Contributions
5.1
5.2
5.3
Work Permits
Labor Related Costs
5.3.1
National Insurance (Social Security)
5.3.2
Paid Vacation
5.3.3
Severance Pay and Pension Funds
5.3.4
Sick Leave
5.3.5
Education Fund
5.3.6
Reserve Military Duty

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33
33
33
33
34
34
34
34
34
5.4
Work Permits
In order for non-resident to work in Israel, a work permit or a status other than tourist is
required.
Under the Law of Return, immigrants are entitled to permanent residence status or an
A-1 visa, which entitles the immigrant to a temporary resident status.
It is a prerequisite for other non-residents who wish to work in Israel to apply for a work
permit (usually B-1 visa). In order to obtain a work permit, Israeli employers must apply
to the Ministry of Labor, and where applicable, also to the Investment Center.
5.5
There is no legal requirement for employers to recognize any trade union unless a
majority of the work force votes in favor of such recognition. Agreements between
employers and trade unions over pay and conditions are not binding by law and unions
may not take industrial action without first securing a majority vote in a secret ballot of
their members. There is no legal requirement for employees to be represented on the
board of directors of companies.
5.6
Labor Related Costs
The Israeli employees' labor and social security costs include the following:
5.6.1 National Insurance (Social Security)

Employees pay up to 12% and employers 6.75% for a total of 18.75% of employees
salaries monthly. Cover includes unemployment insurance, maternity benefits, work
injury, child allowances, old age pensions, medical care costs and reserve military duty
compensation.

Page 33 of 95

5.6.2 Paid Vacation
Employees are entitled to yearly paid vacations of from 2 to 4 weeks depending on
length of employment. They are also entitled to a recreational allowance based on length
of service.
5.6.3 Severance Pay and Pension Funds

Employees are entitled to severance pay on dismissal or reaching retirement age (67 for
men and 64 for women) but not on voluntary resignation. However some employers are
required to pay severance pay on resignation under terms of specific labor agreements.
Severance pay amounts to one months salary for every year of employment based on
the last months salary received. Many employers provide for this by monthly payments
to a provident fund.
In addition, most employers are required by labor agreements to make monthly
payments to pension funds, at the rate of 6% of the average salary published by Social
Insurance Authority, for employees pension on retirement.
5.6.4 Sick Leave

Employees are entitled to payment of sick leave as follows:
The 1st day 0%
The 2nd and 3rd day 50%
The 4th onwards- 100%
5.6.5 Education Fund

Some employers elect to make payment to recognized funds for the ongoing education
of senior and academic employees by monthly payments, at the rate of 5 - 7.5 % - the
employer and 2.5% the employee, from the employees salaries, to a provident fund
5.6.6 Reserve Military Duty

It is customary, though not required by law, that employers pay the difference between
compensation received by employees for periods of reserve duty from the National
Insurance Institute and the regular salary they would otherwise have received.

Page 34 of 95
6.
TAX ATION
6.
Taxation
6.1
6.2
News and Updates

Income Tax
6.2.1
6.2.2
6.2.3
6.2.4
6.2.5
6.3
6.4
6.5
6.6
6.7
Overview
Corporations
6.2.2.1 Residence
6.2.2.2 Tax Rates
Special entities
6.2.3.1 Family Company / Transparent
Company
6.2.3.2 Land Company
6.2.3.3 Partnerships
6.2.3.4 Controlled Foreign Occupational
Company
6.2.3.5 Controlled foreign corporation (CFC)
Dividends Received by a Corporation Domiciled
in Israel
Individuals
6.2.5.1 Residence
6.2.5.2 Tax rates
6.2.5.3 Special Tax Rates for Individuals
A Rental
B Rental derived from Real estate
Located outside Israel
C Interest
D Dividend
E Gambling
Capital Gains Tax

6.3.1
General
6.3.2
Tax Rates
Benefits And Exemptions
6.4.1
Tax incentive for foreign residents
6.4.2
Deductions for Expatriate Employees
6.4.3
Benefits to New Immigrants and Returning
Residents
6.4.3.1 General
6.4.3.2 Definitions
6.4.3.3 The benefits
Employee Stocks/Options Plan

Losses
Administration
6.7.1
6.7.2
Filing Tax Return

Collection of Taxes
6.7.2.1 Withholding Taxes
6.7.2.2 Advance Tax Payments
6.7.2.3 Balance of tax

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37
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38
38
38
39
39
39
39
39
40
41
42
41
43
44
44
44
44
44
45
45
45
45
46
46
47
47
47
47
48
48
49
49
49
50
50
50
50

6.8
6.8.1
6.8.2
6.8.3
6.8.4
6.9
6.10
Value Added Tax (VAT)

Other Taxes
6.10.1
6.10.2
6.10.3
6.10.4
6.10.5
6.11
Double Taxation Relief

Transfer Pricing
6.8.2.1 Transfer Pricing Regulations Setting
an Arm Length Price
6.8.2.2 Reporting Requirements and
Documentation
6.8.2.3 Coming Into Effect and Transitional
Regulations
Taxation of Trusts
Participation Exemption for Israeli Holding
Company
6.8.4.1 Overview
6.8.4.2 Definitions
6.8.4.3 Dividends distributed by the holding
company
Custom Duties
Purchase Tax
Stamp Tax
Estate Tax
Gifts
Real Estate Taxes

6.11.1
6.11.2
6.11.3
6.11.4
6.11.5
Acquisition Tax
Betterment Levy
Land Appreciation Tax
Sales Tax
Municipal tax

Page 36 of 95
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52
52
52
54
54
54
55
55
56
56
56
56
57
57
57
57
58
58
59
59

6.1
News and Updates
On November 25, 2013 a new tax reform had been enforced under The Law for Change
in the Tax Burden (Legislative Amendments), 2013-2014. According to the tax reform,
the tax cuts planned which determined significally low tax rates (as low as 18% on
corporate tax and 39% for individuals) was cancelled; instead corporate tax on 2016 will
be reduced to 25% (26.5% on 2015) and the highest tax bracket's tax rate for individuals
will be rise up to 50% (the same on 2015).
Under the tax reform the taxes on Investment income had stayed the same: The regular
tax rate on dividends, interest, loan discount, capital gains and land appreciation are
25%. The tax rate for dividends paid to major shareholders (holding 10% or more) is
30%. A 30% tax rate will generally apply to sales of shares in real-estate entities by
major shareholders. Those rates are generally applied on foreign investors unless
exempt of tax or a valid treaty in enforced.
In order to boost the Israeli economy and support the exporting industry as well as the
High-tech industry, major tax incentives were introduced as part of the Law of
Encouragement of Capital Investments (see on Chapter 4 of this manual). In addition,
the Israeli Tax Law includes tax incentives for foreign investments in Israel, as tax
exemption on capital gain on the disposal of Israeli corporations' shares. For more
information see Chapter 6.4 of this manual.
As of 2008, and part of the government initiative to attract former Israeli residents and
Jewish people to reside in Israel, major tax exemptions for new residents and for
returning residents had been introduced. For further information see Chapter 6.4.3 of
this manual.
6.2
Income Tax
6.2.1 Overview
According to Israeli Tax Ordinance, Israeli residents, either individuals or corporations,
are subject to income tax on their worldwide taxable income.
Non residents are subject to tax on any income derived from an Israeli source. Where
there is a double tax convention between Israel and the other countries, its terms may
modify the taxable income.

Page 37 of 95

Usually, a fiscal year is a full year, starting on January 1 and ending on December 31,
with very few exemptions, especially for subsidiaries of publicly traded foreign
companies.
With a few exemptions, accounting should be conducted in Israeli currency. Starting
2008, Financial Reports are based on the IFRS (public traded companies adopted
implemented IFRS since 2005). However, for tax purpose, the financial reports should
be based on Israeli GAAP.
The income tax legislation taken as a whole provides for the payment of taxes on
income from defined sources, after deduction of disbursements and expenses incurred
in the production of income. This includes taxes on capital gains and provided special
benefits for investors in approved enterprises. The amount subject to taxation is known
as the taxable income.
6.2.2
Corporations
6.2.2.1
Residence
A corporation is considered an Israeli resident if one of these conditions has been

fulfilled:
The corporation was incorporated under Israeli law; or
The corporation is managed and controlled from Israel.
6.2.2.2
Tax Rates
The taxable income of Israeli corporations is subject to a company tax of 25% (2016)
Dividend paid to another Israeli company is excluded from the taxable income. Dividend
paid to Israeli individuals or foreign residents (both individuals and companies) is subject
to withholding tax of 25%, or 30% if the shareholder holds 10% of the shares or more.
The withholding tax rates can be reduced in case a valid tax convention is taking place.
A foreign corporation having taxable income accrued in Israel would be subject to
company tax as well. Foreign Corporation which conducts business in Israel through a
permanent establishment would be subject to company tax, only for the income accrued
from its activities in Israel.
There is no branch tax.

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As described in other sections of this booklet, Approved Enterprises, foreign controlled
companies, and foreign investors may be subject to different and lower tax rates.
6.2.3
Special entities
6.2.3.1
Family Company / Transparent Company
A company which all of its shareholders are individuals who are family relatives can
apply to be consider as "Family Company". The election should be applied within three
months from the incorporation of the company. (On the Memorandum of the economic
plan for 2015, there is a suggestion, not yet approved, to change filing the request to the
day of incorporation.
Income and losses of the Family Company would be considered as the largest
shareholder's income and losses.
Dividend distributed to the shareholders from income derived from the Family Company,
would not be subject to taxes.
6.2.3.2
Land Company
Land Company is a company which all of its assets and business are buildings and the
possession of buildings. At the request of the company, its taxable income and loss
would be attributed to its shareholders.
6.2.3.3
Partnerships
Partnerships, either registered or non-registered, are disregarded for tax purpose. Each
partner would include his portion of the partnership taxable income (or losses) as his
taxable income or loss.
6.2.3.4
Controlled Foreign Occupational Company
"Foreign Occupational Company" a foreign corporation for which all the following
hold true:
If it is a company, then it is a small company, which is being held by no more

than 5 persons. For this purpose, related individuals would be considered as one
person);

Page 39 of 95
At least 75% of its shares are controlled, directly or indirectly, by Israeli

individuals;
The company's Israelis shareholders are engaging in a "Special Occupation" for

the benefit of the company; and
Most of the company's income stems from the "Special Occupation".
A Controlled Foreign Occupational Company is deemed to be managed and controlled

from Israel. Any income attributed from the "Special Occupation" by the Israeli
shareholders is deemed to be accrued as Israeli source income; therefore it is subject to
Israeli company tax.
Tax credit will be granted in respect of the foreign tax paid.
6.2.3.5
Controlled foreign corporation (CFC)
Controlled foreign corporation is a foreign corporation for which all the following hold
true:
More than 50% of its shareholders are, directly or indirectly, Israeli residents.
Most of the corporations income or earnings during the tax year are derived from
Passive Income. For this purpose, Passive Income shall constitute income from
interest or linkage differentials, dividends, royalties, rental fees, and proceeds
from the sale of an asset not used by the corporation for its business.
The corporation's shares or rights thereto, are not listed for trade on the stock
exchange; however, if said shares or rights were partly listed, less than 30%
thereof were offered to the public.
The tax rate on the Passive Income derived from the foreign countries does not
exceed 15%.
The Israeli controlling shareholder of the CFC, would be deemed to receive dividend
from the CFC as his portion on the undistributed profits of the CFC by the end of the tax
year.
The controlling shareholder would be relief from the foreign tax which would have been
applied in the country of the CFC's residency, had the dividend actually been distributed.
Special provisions apply to shareholders holdings a chain of companies.

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6.2.4
Dividends Received by a Corporation

Domiciled in Israel
Dividends received by an Israeli Company from another Israeli corporation, is excluded

from the taxable income.
Dividends received by an Israeli Company from a foreign corporation, or dividends from
income generated or derived abroad, is taxable according to the following:
Notwithstanding the Corporate tax rate, the said dividend would be taxed on 25%
tax rate, out of which tax credit would be applied according to the tax withheld by
the foreign country when the dividends were distributed ("direct credit"); or
Where the Israeli Company holds at least 25% of the controlling power in the
foreign corporation, an indirect credit would be applied. The Indirect Credit is
calculated by applying normal corporate tax on the "gross dividend" (the sum of
the actual dividend Plus the taxes paid on the income from which the dividend
was paid); Tax credit would be applied in respect of the foreign tax paid on the
income from which the dividend was paid in addition to the foreign tax which was
withheld. Relief for indirect credit is limited to the Israeli corporate tax liability on
that income.
Indirect credit is applied up to the 2nd tier subsidiary, provided it is being held
directly for at least 50%.
Dividends distributed from an Approved Enterprises and /or to foreign investors may be
subject to different tax rates.

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6.2.5
Individuals
6.2.5.1
Residence
An individual would be considering as an Israeli Resident if his "center of life" is within

Israel. In the framework of determining the individual's center of life", a number of
auxiliary qualitative criteria had been applied. This framework includes, inter- alia, an
evaluation of the following:
Location of his permanent home (even if he does not reside therein).
Location of actual home of himself and members of his family, i.e. actual place of
residence.
Location of fixed or permanent business or work.
Location of active material economic interests.
Location of activity in organizations, associations or institutions.
In addition to the said qualitative criteria, the legislation prescribes reinforcements as

the existence of which provide evidences of the individuals center of life in Israel.
The first reinforcements prescribes that an individual presence in Israel for 183 days or
more in a certain tax year serves as an evidence of his center of life in Israel during
that year.
The second reinforcement prescribes that an individual presence in Israel for 30 days or
more in a certain tax year, and total presence in Israel of 425 days or more during that
tax year and the two previous ones, serves as an evidence of his center of life in Israel
during the later year.
It should be noted that the above reinforcements may be refuted by either the individual
or the tax authorities.

Page 42 of 95

6.2.5.2 Tax rates
Tax rate on individuals' income is being determined progressively, according to the
amount of taxable income for the whole taxable year.
Tax rates are reducing gradually as shown in the next table:
Income (NIS)
2016
Up to 63,640
10%
63,641 - 107,040
14%
107,041-166,320
21%
166,321-237,600
31%
237,601-496,920
34%
496,921-803,520
48%
Individual that his annual income is over than 803,520 NIS will be taxed at
50%on annual income in excess of this amount.
Tax rates on individuals' passive income are as follows:
Income (NIS)
2016
Up to 237,600
31%
237,601-496,920
34%
496,921-803,520
48%
Tax brackets are adjusted annually in accordance with changes of the CPI.
There are exceptions to the above tax brackets, such as: income from dividends,
interest, rental of residential housing, etc. There are also allowances for savings in
pension funds, life insurance etc.
Individuals are entitled to personal tax credits against calculated tax. The amount of the
credits depends on personal status. Most of the credits are not available to nonresidents and some are available only to new immigrants.

Page 43 of 95

6.2.5.3 Special Tax Rates for Individuals
A. Rental
Income from rental fees of residential apartment is exempt from income tax, if the
income does not exceed 5,030 NIS(2016) per month.
The income tax liability on rental fees from renting a residential apartment can also be
calculated on the basis of one of the following alternatives:
(a) Rental income is calculated after deduction of expenses according to

the regular tax bracket; or,
(b) Tax is payable at a flat rate of 10% of rental gross income. No

deduction or expenses are allowed.
B. Rental Derived From Real Estate Located Outside

Israel
An individual accruing income derived from rental of real estate property located outside
Israel, may elect to pay tax on such income at the rate of 15% from the gross income,
instead of the individuals graduated tax bracket to which the individual is subject to, if
the said rental income does not reach the level of business income. Having chosen this
alternative 15% tax rate, no deduction or expenses are allowed, and there will be no
credit in respect of foreign tax paid abroad. Notwithstanding the above, depreciation on
the building would be deductible.
C. Interest
Most of the interest income from bank deposits and savings plans will be subject to 25%
tax rate, if certain conditions are met. Concurrently with the tax liability, exemptions were
determined for low income earners and retired persons.
D. Dividend
Dividend paid to an Israeli individual from both Israeli or foreign corporation, is subject to
25% tax rate. If the individual holds 10% or more of the corporation means of control, the
tax rate imposed on him will be 30%.

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A foreign individual or foreign company would be subject to tax upon dividends received
from an Israeli corporation as an Israeli individual, unless a valid tax treaty is being
enforced.
E. Gambling
There is 30% tax rate on gambling income.
6.3
Capital Gains Tax
6.3.1
General
Gains from the sale of fixed and intangible assets (other than real estate) are taxed
under the Income Tax Ordinance.
A capital gain is the excess of the sale proceeds of an asset over its depreciated cost. In
determining the capital gain, inflation index is being considered.
6.3.2
Tax Rates
Capital gain derived by companies is subject to the general company tax 25%.(on
2016)
Capital gain derived by individuals is subject to 25% tax rate. "Major Shareholder" who
holds 10% or more of corporation securities, is subject to 30% tax rate.
Upon disposal of an asset purchased by a "Major Shareholder" prior to January 1, 2003
is subject to ordinary tax rates (up to 48%) on the proportional period from the day of
purchase until January 1, 2003, and 25% rate for the period starting January 1, 2003 to
December 31, 2011. The tax is being calculated on the linear bases.
In computation of capital gain, Inflationary gain is subtracted from the taxable capital
gain. Inflationary gain is determined by multiplying the depreciated cost by the Inflation
index. Inflationary gain is exempt from tax, unless the inflationary gain accrued since the
date of purchase to the end of the tax year 1993 is taxable at 10% tax rate.
Liquidation of company is considered as capital gain, and the shareholders are treated
as if they sold their shares in exchange to their share of the company's net assets fair
value.

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In computation of capital gain of an Israeli company, from the disposal of shares of
another Israeli company, the amount equals to the retain earnings of the later, as the
first company's portion, would be exempt from tax (as if the retain earning had been
distributed).
6.4
Benefits and Exemptions
6.4.1
Tax Incentive for Foreign Residents
There are several tax incentives for foreign residents investing in bonds and in Israeli
companies' securities:
Foreign residents are subject to the same tax rates as Israeli residents.
However, if foreign currency was invested, they may choose to calculate the
capital gains in the original currency rather than in Israeli currency.
In addition, the inflationary gain on the sale of shares of an Israeli company or
other assets, purchased originally with foreign currency, is exempt from tax if
the calculation is based on changes in the specific exchange rates of the Israeli
currency.
A foreign resident will be exempt from capital gains tax in respect of sale of
marketable securities, if the capital gains are derived from a non Israeli
permanent establishment of the foreign resident in Israel. The above exemption
will also apply to securities purchased prior to being listed. These will be taxed
at sale only on the part of the capital gains developed up until their listing,
(capital gains of a notional sale at time of listing).
Foreign residents of a treaty country, under certain conditions set below, are
exempt from capital gain tax on the sale of Israeli non-tradable securities, or
foreign securities whose main assets are located in Israel. The exemption is
limited to securities purchased between July 1, 2005 and December 31, 2008,
and is subject to certain requirements.
As from 2009, all foreign residents are exempt from capital gain tax on the sale
of Israeli securities, or foreign securities whose main assets are located in
Israel. The exemption is limited to securities purchased not before 2009.
The exemption will not apply to the sale of the securities of a company, the
majority of whose assets, at the time of purchase and for the two years
preceding the sale thereof, were comprised of real estate and/or real estate
companies.

Page 46 of 95
Interests paid to non residents from bonds traded in the Israeli Stock Exchange
are exempt from tax. During 2011 the Ministry of Finance had cancelled this
exemption due to major foreign investments in Israeli bond due to the relatively
high interest rate. Nonetheless, treaty benefits are still applied.
6.4.2
Deductions for Expatriate Employees
A "Foreign Specialist" or a "Visiting Professor" (as describe on the regulations) entitles

for a deduction during the period of his stay in Israel, but no more than 12 months, out of
his generated Israeli income the following:
Payments he made for rental or accommodations in Israel; and
A sum of 320 NIS (2016) per day paid for meals.
"Foreign Specialist" a foreign resident which consist of all the following:
His stay in Israel is permitted according to the law;
He was invited from abroad by an Israeli resident to perform services to

that Israeli resident on the field of his expertise.
He was paid more than 13,200 NIS (2016) per month for his service.
6.4.3
Benefits to New Immigrants and

Returning Residents
6.4.3.1
General
In order to attract new immigrants and returning residents to Israel, the Ministry of
Finance, along with the Ministry of immigrant absorption had approved a new tax reform,
which constitutes extended tax exceptions and other benefits and incentives for new
immigrants and returning residents.
The reform was approved on the "Knesset" (the Israeli Parliament) on September 2008,
but its actions were constitutes retroactive for all immigrants and returning residents
reside in Israel since January 1, 2007.
6.4.3.2
Definitions
New Immigrant is an individual who acquires the status of an Israeli resident for the
first time.

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Returning Resident is an individual who ceased to be Israeli resident and lived
outside Israel on a permanent basis during at least six consecutive years after ceasing
to be an Israeli resident, subsequent to which he returned to Israel.
Senior Returning Resident is an individual who ceased to be an Israeli resident and
lived outside Israel on a permanent basis during at least ten consecutive years,
subsequent to which he returned to Israel.
6.4.3.3
The Benefits
Ten years tax exemption for new immigrants and senior returning
residents on all income and capital gain derived outside of Israel.
New Immigrant and Senior Returning Resident can apply for an

acclimatization period of one year from the time an individual arrives in
Israel during which the individual, at his own request, will not be
considered Israeli resident for tax purpose.
Foreign companies controlled by New Immigrants and Senior Returning

Residents will not be classified as Israeli Companies, or as a Control
Foreign Corporation, or as a Control Foreign Occupational Company, as if
the New Immigrant or the Senior Returning Resident would have been
foreign resident.
New Immigrants and Senior Returning Residents are exempt from

reporting their tax-exempt income and foreign assets.
A returning resident is exempt for interests, dividends, pensions, royalties

and rental, which derived from assets he obtained when he was a foreign
resident.
6.5
Em pl o ye e S t oc k O pti on s Pla n
Generally, a benefit compensation granted by employer to its employees is subject to

the employee's income tax rate.
Section 102 to the Tax Ordinance allows a company to elect granting restricted for at
last 24 months options/shares to trust, whereby upon the release of the options/shares
from the trust to the employee; the employee will be subject to tax for capital gain - 25%
or tax at regular individual income tax rate, based on the original election of the
company.
Provided that, should the company elect the capital gain course,
compensation cost relate to the options/shares granting will not be deductible for tax
purposes by the granting company.

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The provisions of Section 102 refer only to granting to employees that following such
granting hold less than 10% of the outstanding shares of the company.
6.6
Losses
A loss incurred by a person during the tax year in a business or vocation may be set off
against that person's total chargeable income from other sources in that tax year.
If all of the loss cannot be wholly set off in the said tax year, then the amount of loss not
set off shall be carried forward to the subsequent years in succession and it shall be set
off against that person's total chargeable income from business or vocation in those
years, including capital gains from business or vocation.
A loss incurred by a person from the letting of a building may be set off against his
income from that building in subsequent years.
The amount of capital loss suffered by a person in a giving tax year shall be set off
against that person's capital gain.
Capital loss incurred by the sale of securities during the tax year, the capital loss may
also be set off against interest or dividends, as long as the tax rate applicable to the
interest or dividend received by that person would not exceed 25%.
Capital loss which could not be set off during the said tax year would be carried forward
to the subsequent years in succession and it shall be set off only against capital gain.
6.7
Administration
6.7.1 Filing Tax Return

Taxpayers carrying on business are required to keep accounting records and file tax
returns. The Director of the Tax Authority issues directives on the manner in which such
records shall be kept. The Director may refuse to accept tax returns based on records
not properly kept and may then summarily issue assessments according to his
judgment.
Taxpayers who are employees or taxpayers whom their only income is subject to full
withholding tax are not required to file annual tax returns.
Company tax returns must include the following:

Page 49 of 95
Full scope financial statements, according to the Israeli General Accepted

Principals, audited by certify accountant.
Tax Adjustment Statements, review by accountant.
Tax returns should be filed within 4-5 months from the end of the tax year (the tax year
ends on December 31, annually) unless an extension has been applied for and granted.
6.7.2 Collection of Taxes

6.7.2.1
Withholding Taxes
To a large extent, the tax collection system is based of withholding of tax deducted at
source from payments.
All employers are obligated to withhold tax on employee's salary (employees usually are
not required to file tax returns).
Payment for nonresident which constitute as taxable income of the recipient requires
withholding tax of 25% from the payment, unless the scope of a valid treaty is being
enforced.
6.7.2.2
Advance Tax Payments
Companies and self-employed individuals are required for monthly advance payments
during the year. These payments are based on turnover or on the actual tax liability
determined on the previous tax year for which an assessment has been issued. Withheld
tax may be set off against advance payments.
Monthly advance tax payments, at the rate of 45%, must also be made on certain
nondeductible expenses such as excessive car expenses, foreign travel or
entertainment expenses.
6.7.2.3
Balance of Tax
The balance of tax payable determined in the tax return, after deducting the above
advances and withholding taxes must be paid on filing the tax return. This balance is
linked to increases in the CPI from the end of the tax year and bear interest at the rate of
4% per annum.

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In the event of an overpayment, the balance accrues interest and linkage income on the
same terms.
6.8
6.8.1 Double Taxation Relief

Income derived abroad, and is taxable in another country, may be entitled for tax relief.
Israel has signed comprehensive bilateral treaties for the avoidance of double taxation
with most of its principal trading partners, based on the model recommended by the
Organization for Economic Cooperation and Development (OECD). These treaties
restrict the right of their signatories to tax income from particular sources and oblige the
country of a taxpayer's residence to credit him for taxes paid in the country where
income arose.
6.8.2 Transfer Pricing

Section 85A of the Income Tax Ordinance determines that every international
transaction between related parties must reflect the fair value, according to the arms
length principal. The Transfer Pricing Regulations introduced in 2006, determines the
scope of the inspected transactions and the necessary means for achieving the fair
market. The regulations are based on both the OECD 1995 transfer pricing guidelines
and the U.S main principals.
6.8.2.1 Transfer Pricing Regulations Setting an Arm

Length Price
In order to ascertain whether an international transaction conducted between related
parties is at a fair market or arms length price, market research must be performed
whereby the international transaction is compared to similar transactions by specific
comparison methods. Once a comparison method has been selected and the market
research performed, the international transaction will be deemed to be conducted at a
fair market price, insofar as it does not deviate from the specified range of the said
market price. If the international transaction does deviate from the specified range, as
determined by the Regulations, the reported price of the transaction will be adjusted for
tax purposes in the manner stipulated by the Regulations and, consequently, the
assessed will be subject to additional tax on the adjusted price.

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If the transaction is a one-off international transaction, duly approved as such by the
assessing officer, no obligation to perform the market research will apply. Nonetheless, a
one-off international transaction will not be exempt from some of the reporting
requirements outlined below.
6.8.2.2 Reporting Requirements and Documentation

The Regulations oblige any tax entity who is party to an international transaction, to
report in his annual tax return, the execution of the international transaction, its actual
conditions and price thereof as well as the conditions and price of the transaction at fair
market value, on the predetermined form.
In addition, at the request of the assessing officer, the entity must present, within 60
days, a comprehensive report detailing the international transaction. The said reporting
obligation will apply to all international transactions, regardless of the size of the
particular international transaction or the overall turnover of the transactions.
As such, in terms of the Regulations, even transactions for which special conditions
apply between small businesses and the other non Israeli party to the transaction, the
small businesses will be obliged to comply with the reporting requirements.
6.8.2.3 Coming Into Effect and Transitional

Regulations
The Regulations came into effect in respect of international transactions executed from
publication date thereof (29 November 2006). Market research performed before the
Regulations came into effect would be considered as market research according to the
Regulations, if performed within two years from publication thereof and provided it was
performed within the OECD accepted guidelines or within the guidelines of OECD
member states.
6.8.3 Taxation of Trusts

The tax treatment of trusts distinguishes between six types of trusts:
Israeli Resident Beneficiary Trust

Relatives Trust
Israeli Resident Trust
Foreign Resident Settler Trust

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Foreign Resident Beneficiary Trust
Testamentary Trust
Trusts are flowing-trough entities for tax purpose. Therefore, the trust's income will be
considered as the settler's or the beneficiary's income.
Israeli Resident Beneficiary Trust is a Trust that from its establishment all of her settlers
are foreign and in the taxable year there is at least one beneficiary who is Israeli
Resident.
Relative Trust is an Israeli Resident Beneficiary Trust that between her Settlers and
beneficiaries exist close relation. The Trust will be taxable with 30% on the distribution
to the beneficiary on the taxable year, or with 25% on the full income.
Israeli Resident Trust will usually be taxed as if the trusts income and asset accrued to
the settler. As an irrevocable trust is concerned it is possible, by the taxpayer request, to
attribute the income to the beneficiary instead of to the settler.
Foreign Resident Trust is a trust where all the settlers and all the beneficiaries are
foreign residents. The trusts income and assets would be considered as assets which
are held by a foreign Resident. Conclusively, there is no Israeli tax imposed on the trusts
income or assets, unless income is derived from Israeli source.
Conversely, in a Foreign Resident Beneficiary Trust and in a Testamentary Trust, the
trust's income is accrued to the beneficiary. Therefore, an Israeli settler would be taxed
on income derived from impartation an asset to the trust, as if the settler had transferred
the assets to the beneficiary directly. There is no additional tax to the beneficiary unless
the income derived from an Israeli source.
Holding Company Trust Assets A company that established to holds the Trustee's
assets. The company has to report its establishment within 90 days.
Such company will not be considered as an Israeli Resident Company for the purposes
of Tax treaties.

Page 53 of 95

6.8.4 Participation Exemption for Israeli Holding
Company
6.8.4.1 Overview
The tax reform includes participation-exemption conditions for Israeli holding companies,
under specific circumstances. Israeli holding companies will be exempt from tax on
dividends received from foreign subsidiaries and from capital gains tax upon the sale of
such subsidiaries. Furthermore, Israeli holding companies will be exempt, inter-alia, from
tax on interest received on bank deposits in Israel and on income (interest, dividend and
capital gains) from traded securities.
Dividend paid by the Israeli holding company to its foreign shareholders is subject to
reduced withholding tax of only 5%.
6.8.4.2 Definitions
An Israeli holding company is a company that has to meet all of these conditions:
The company was registered in Israel and is managed and controlled

from within Israel;
The company is privately owned and not a transparent or family company

(similar although not identical, to the U.S. S-Corp). Additionally, the
company must not be a financial institution;
Its investment in foreign subsidiaries for at least 300 days of the tax year
amounted to a minimum of NIS 50 million (approx. US$12.5 million);
For at least 300 days of the tax year, a minimum of 75% of its assets
constitute the subsidiaries (including loans granted to subsidiaries);
The holding company has no business income except for services,

including management services, provided to the subsidiaries; and
The holding company submits a request to be recognized as such to the

assessing officer within the timeframe stipulated;
Subsidiary for participation exemption purposes is foreign company that has to meet all
of these conditions:
The company is a resident of a treaty country (who files tax returns in that
country) irrespective of the corporate tax rate of the particular country, or
it is resident of a non-treaty country only if the corporate tax rate on
Page 54 of 95

business income of the non-treaty country is greater than 15% at the time
the shares were purchased;
At least 10% of rights to profits of the subsidiary are owned by the Israeli
holding company for 12 consecutive months;
At least 75% of the subsidiarys income derived abroad is business

income; and
Israeli assets and Israeli income of the subsidiary may not comprise more
than 20% of the subsidiarys total assets or income, respectively.
There are no limitations as to the identity of the holding companys shareholders.

However, as shown henceforth, Israeli shareholders cannot obtain any tax advantage.
6.8.4.3 Dividends Distributed by Holding Company

A foreign shareholder will pay a 5% flat tax rate on dividends distributed by the holding
company, irrespective of their legal status (individual, corporation, trust etc.), and
irrespective of the source of income from which the dividend is distributed. Double tax
treaties may further improve this tax rate the Israel- Sweden DTT, for example, has set
a 0% tax rate for such dividends.
An Israeli shareholder will pay the regular tax rates imposed on distributed dividends
(25% to 30%, or company tax).
6.9
Value Added Tax (V AT)
The Value Added Tax Law requires the payment of VAT of 17% (2016) on goods sold
and services rendered and is collected from the buyer by the seller at the time of sale.
These amounts, less VAT paid by the seller on his inputs, are paid monthly to the tax
authorities. If the VAT on inputs exceeds amounts collected in any given period, the
excess is refundable. VAT on inputs not related to the production of income and VAT on
some expenses, which are not tax deductible, may not be claimed.
Financial institutions, such as banks and insurance companies, do not collect VAT on
their services and may not claim VAT on inputs, but instead pay payroll tax of 17%
(2016) on payroll costs and on profits. Profits for payroll purposes are similar to taxable
income for tax purposes before the set off of losses from previous years.
Nonprofit organizations pay payroll tax of 7.5% and may not set off VAT on inputs.
Importers pay 17% VAT on value of goods for customs purposes when cleared.
Page 55 of 95

Some transactions are zero-rated. This means that a nil rate of tax is to be charged, but
the business supplying the goods or services is nevertheless entitled to a refund of the
VAT it has incurred on its purchases. Businesses making only zero-rated supplies will
therefore be in a position to obtain periodic refunds from the tax authorities.
Some services are exempt. Again there is no VAT to be charged, but in contrast to the
position on zero-rated supplies the vendor is not entitled to a refund of the VAT paid on
purchases. Businesses that make exempt supplies in addition to either standard-rated or
zero rated supplies may be able to recover part of the VAT they incur on their
purchases.
The principal categories of main goods and services classed as zero-rated or exempt
are listed in Appendix 4.
The VAT compliance regulations are strict and penalties are imposed for the late
submission of periodic returns and for errors in returns.
Businesses need to avoid potential problems by implementing an efficient accounting
system at an early stage.
6.10 Other Taxes

6.10.1 Custom Duties
Certain goods imported to Israel are subject to custom duties. The rates vary and are
usually based on CIF value. Various agreements with the USA, European Community
and EFTA reduce duties in comparison to imports from other countries.
6.10.2 Purchase Tax

Certain goods sold in Israel are subject to purchase tax. The tax is payable by the Israeli
manufacture or by the importer at the port of entry.
Goods manufactured for export are exempt from purchase tax.
6.10.3 Stamp Tax

Most contracts and legal documents are subject to stamp tax of 0.4% to 2% of the stated
value. As of January 1, 2006 the stamp tax imposed on most contracts and official
documents were cancelled.

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6.10.4 Estate Tax
There is no estate tax in Israel
6.10.5 Gifts
There is no gifts tax on the beneficiary.
An asset which was given as a gift is considered capital gain to the extent of the fair
value of the asset. However, had an asset been given to a relative or to the state of
Israel, it is exempt from tax.
The exemption will not apply in a case the beneficiary is a foreign resident.
6.11 Real Estate Taxes

6.11.1 Acquisition Tax
Purchase of real estate is subject to an acquisition tax, to be paid by the buyer. The tax
is based on the purchase price of the assets as follows:
Residential dwellings
0% -10%
Other
0.5% - 6%
The Purchase Tax rates on Residential dwellings are as follows:

Date of purchase
16.1.2016-15.1.2017
Singular Apartment (NIS)

Another Apartment (NIS)
(Including a Foreign Resident
that became an Israeli
resident within two years
from the purchase))
0 1,600,175 0%
Up to 4,896,615- 8%
1,600,175-1,898,005 - 3.5%
1,898,005-4,896,615 - 5%
4,896,615 and up-10%
4,896,615-16,322,055 - 8%
16,322,055 and up - 10%

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Newcomers are entitled to receive tax relief when purchasing an apartment or a
business during the period beginning a year before immigrating to Israel and ends seven
years after. The purchase tax rate in this case will be as follows: (16.1.16- 15.1.17)
Up to 1,734,225 NIS- 0.5%
1,734,225 and up- 5%
6.11.2 Betterment Levy

Betterment levy at the rate of 50% is imposed on real estate, if its value increased due to
changes in building rights or upon rezoning. The levy, linked to increases in price
indices, is payable when a building permit is issued or upon the sale of the asset.
6.11.3 Land Appreciation Tax

Profits on the sale of real estate rights in Israel are subject to capital gain tax under the
Land Appreciation Tax Law. The calculation of the tax is similar to that of other assets
subject to capital gains tax However; special rules apply to the sale of shares and rights
in companies in which the major assets consist of real estate (Real Estate Entities).
The sale of residential dwellings by individuals is exempt from tax only if it is the
individual's only apartment. The exemption will be given up to 4,456,000 NIS(2016). For
a foreign resident to receive this exemption, he has to present a specific authorization
from his country's authority that he does not have an apartment in his residential country.
The exemption from Tax betterment given one to 4 years has been canceled.
As previously stated, the sale of real estate may be subject to capital gain tax. The
regulations applicable to the sale of real estate are almost identical to those mentioned
above.
The land Appreciation tax was reduced on November 7, 2001 as follows:
The tax on land betterment, accrued until November 7, 2001 will be at

the marginal rate of up to 48% for individuals and 29% for companies
(in 2007).
The tax on land betterment, accrued after November 7, 2001 will be

at the rate of 20% for individuals (in 2007 onward), and 25% for
companies.

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Distribution of land betterment among the various periods will be implemented on a
linear basis.
6.11.4 Sales Tax

The following tax rate is applicable to the sale of real estate:
Sale of land or title to a property purchased prior to November 7,

2001 2.5%.
Sale of land or title to a property purchased after November 7, 2001

is exempt from sales tax.
Sale of residential real estate held as inventory is exempt from tax.
The sales tax on real estate transactions executed after November 7, 2001, is taxdeductible from the sellers income.
6.11.5 Municipal tax

This annual tax, known as Arnona, is payable to the relevant local authority. The rate is
based on the floor, area and location of the property.

Page 59 of 95
Appendix
APPENDIX 1 - Withholding Taxes on
Dividend Payments
Dividend payments to overseas shareholders are generally subject to the deduction of
withholding taxes of 25% to 30%. The following table, however, summarizes the
withholding tax rates according to existing tax treaties. One should bear in mind that the
data listed below is subject to exceptions, conditions and etc. according to the details of
each treaty.
%
Austria
Belgium
Byelorussia
Brazil
Bulgaria
Canada
China
Croatia
Czech
Denmark
Estonia
Ethiopia
Finland
France
Germany
Greece
Hungary
India
Ireland
Italy
Jamaica
Japan
Latvia
Lithuania
25
15
10
15/10
12.5/10
15
10
5/10/15
15/5
25
0/5
5/10/15
15/10/5
15/10/5
25
25
15/5
10
10
10/15
22.5/15
15/5
15/10/5
15/10/5
%
Luxemburg
Mexico
Moldova
Netherlands
Norway
Philippines
Poland
Portugal
Romania
Russia
Singapore
Slovakia
Slovenia
South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
Turkey
Ukraine
United States
United Kingdom
Uzbekistan
15/10/5
10/5
5/10
15/10/5
25
15/10
10/5
5/10/15
15
10
5/10
10/5
5/10/15
25
15/10/5
10
0
15/5
15/10
10
15/10/5
25/15/12.5
15
10

Page 60 of 95
Appendix
APPENDIX 2 - Withholding Taxes on Interest

P a ym e nt s
Interest payments to overseas lenders are generally subject to the deduction of
withholding tax of 25%. The following table, however, summarizes the withholding tax
rates according to existing tax treaties. One should bear in mind that the data listed
below is subject to exceptions, conditions and etc. according to the details of each
treaty.
Additionally the Commissioner of Taxes may, under certain circumstances, depending
on the interest rate payable by the lender, reduce the tax rate.
%
Austria
Belgium
Byelorussia
Brazil
Bulgaria
Canada
China
Croatia
Czech
Denmark
Estonia
Ethiopia
Finland
France
Germany
Greece
Hungary
India
Ireland
Italy
Jamaica
Japan
Latvia
Lithuania
15
15
10/5/0
15/0
10/5
15
10/7
5/10
10/0
25
5
5/10
10/0
10/5
15/0
10
0
10/0
10/5
10
15/0
10
10/5
10
%
Luxemburg
Mexico
Moldova
Netherlands
Norway
Philippine
Poland
Portugal
Romania
Russia
Singapore
Slovakia
Slovenia
South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
Turkey
Ukraine
United States
United Kingdom
Uzbekistan
10/5
10
5
15/10
25
10/0
5
10
10/5
10/0
7
10
5
25
10/7.5
10/5
25
10/5
15/10
10/0
10/5
17.5/10
15
10

Page 61 of 95
Appendix
AP P E NDI X 3 - Wit hhol di ng Ta x es on Ro ya l t y
P a ym e nt s
Royalty payments are generally subject to the deduction of withholding tax of 25%. The
following table, however, summarizes the withholding tax rates according to existing tax
treaties. One should bear in mind that the data listed below is subject to exceptions,
conditions and etc. according to the details of each treaty.
%
Austria
Belgium
Byelorussia
Brazil
Bulgaria
Canada
China
Croatia
Czech
Denmark
Estonia
Ethiopia
Finland
France
Germany
Greece
Hungary
India
Ireland
Italy
Jamaica
Japan
Latvia
Lithuania
10
10/0
10/5
15/10
12.5
15/0
10
5
5
10
0
5
10
10
5/0
10
0
10
10
Up to 10
10
10
5
10/5
%
Luxemburg
Mexico
Moldova
Netherlands
Norway
Philippine
Poland
Portugal
Romania
Russia
Singapore
Slovakia
Slovenia
South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
Turkey
Ukraine
United States
United Kingdom
Uzbekistan
5
10
5
10/5
10
Up to 15
10/5
10
10
10
5
10
5
1.5
5/2
7/5
0
5
15/5
10
10
15/10
15/0
10/5

Page 62 of 95
Appendix
APPENDIX 4 - V AT: Zero-rating and exemptions

The principle categories of goods and services classed as zero-rated or exempt are as
follows:
Zero-rate
Exempt
Goods exported and sold for foreign Rent received on a private residence for a
currency.
period of less than 25 years.
Receipts by a hotel for services Proceeds from the sale of a building, which
rendered to tourists and paid for in is rental building under the Encouragement
foreign currency.
of Capital Investment Law, leased for not
less than 10 years before the sale.
Receipts for services rendered outside Sale of an apartment which is not new by
Israel to a nonresident by a person an individual who is not a dealer.
whose main place of business is in
Israel, if payment is made in foreign
currency.
Receipts for services rendered in Israel The import of personal effects by a new
for a nonresident. However, the service immigrant.
will not be exempt if it is provided in
relation to assets situated in Israel,
unless they are for export and have
been exported, or if there is an Israeli
beneficiary from this service
Sale of an intangible asset to a Exported goods, re-imported.
nonresident.
Goods sold by a duty free shop.
Income from
institutions.
deposits

Page 63 of 95
with
financial
Notes
Notes
Crowe Horwath (Israel) Doing business in Israel 2016

Page 64 of 95
Crow e Horw ath (Israel)

FIRM PROFILE
Crowe Horwath (Israel) provides accounting, auditing, tax and advisory services. The firm was
established in the early 1982's operate through a head office in Ramat Gan, 4 branches which
cover North, South and East of Israel and an International Division consisting of a US- UK and
Canadian desks of operation.
Crowe Horwath (Israel) provides audit and consulting services to publicly traded companies
on Tel Aviv, NASDAQ and AIM London and TSX Toronto stock markets, private SM entities,
governmental institutions, nonprofitable organizations, startup and development stage
companies.
The firm provides its clients service with a vision toward maximizing the client's development
and growth potential as an international player. The firm service client team consists of CPAs,
economists, lawyers, internal auditors and tax advisors divided to categories by specialize
skills and expertise required for the services in order to maximize the realization of our
technical knowhow and experience in the different business fields of our clients.
The professional relations with Crowe Horwath International of the International Division and
US and UK Desk of operation, allow us to provide response to global clients needs.
Our client service teams include American staff that is engaged with our clients in Israel and in
some cases some of our local staff may temporarily relocated to Horwath international firms
outside Israel.
The firm is PCAOB registered to act as CPA for companies trading on US stock exchanges
and registered with TSX stock exchange in Toronto.
Among the firm's departments: audit, technical accounting and SEC services, corporate taxes,
US tax services, economic and valuation services, internal and forensic audit, incentive
programs and R&D financing, individual services, and International Desk of Operation for US
and UK and Canada.
Services are provided to both the private and public sectors, in the following fields: industry,
high-tech, real estate, commerce and services, financial institutions, not-for-profit
organizations, and others, in a wide range of areas, such as: international and local taxation,
capital raising, mergers and acquisitions, due diligence, pre-ruling and SARBOX 404. Crowe
Horwath (Israel) provides clients with continuance professional technical guidance and
training in accounting, taxation and business topics through conferences, seminars and
professional news alerts.
__________________________________________________________________________________________________________
Crowe Horwath (Israel) Firm Profile
Page 65 of 95
Firm Profile
Our Mission and Philosophy:
The Firm strives to maintain professional, excellence, efficient and authoritative services in
accordance with the highest standards of quality and ethics in compliance with the firm's
reputation and the profession regulations.
Fields of expertise
Public companies traded in Israel an abroad, technology companies and Medical devices,
financial institutes, hi-tech, start-up companies, hotels, real estate, commerce and service,
non-for profit organizations, associations, companies in the capital markets and partnerships.
Our expertise includes Israeli GAAP, IFRS and US GAAP as well as the Israeli Securities
Authority Regulations, US SEC Regulations and UK Regulations under the quality assurance
procedures of the firm, and Horwath International.
Departments and Specialties:
Israeli Capital Markets Division provides services of accounting, auditing, review, Initial
Public Offering, Private Placement and due diligence to public traded companies and the state
of Israel governmental institutes.
International Division provides services of accounting, auditing, review, Initial Public
Offering, Private Placement and due diligence to public traded companies in various stock
exchange: NASDAQ, AIM and Toronto to report under IFRS and US GAAP.
SME Division provides services of accounting, auditing, preparation of tax returns, and
business consulting to entities report under Israeli local GAAP.
Accounting and Auditing Technical Services provides consulting in accounting and auditing,
technical training, expert reports in accounting issues and Continuance Professional
Education Seminars (CPE).
Tax Services provides services of tax planning grounding for complex-transaction and
capital issuance, tax pre-ruling applications in Israel and abroad, tax benefits planning under
the various encouragement laws, value added tax, land betterment tax, national security.
US Tax Services provides US tax compliance, tax planning and voluntary disclosure to the
US Internal Revenue Services
Transfer price provides transfer pricing, tax documentation and economic benchmark
studies for Israel and various foreign nations' law and regulation.
Economic and Valuation Department provides valuation for intangible assets, investments,
mergers and acquisitions, capital issuance, fairness opinion, business and financial models
for investors and strategic partners. Additional services include: accounting due diligence,
business plans, re-organization plans, corporate liquidations, etc.

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Firm Profile
Internal and Forensic Audit & Risk Management provides internal and forensic audit
services, risk management, and integrity issues, consult for internal control process and
procedures.
Incentives, Financing, and Research deals with government financing for companies
involved in technology, biotechnology, medical devices, life sciences and industry.
Human Resources Management provides tax and accounting advice on employee
compensation, incentive share option plans, reallocation plans, and trust and escrow services.
Individual Client Services provides services of personal tax returns, capital declarations for
Tax authority, financing consultation, etc.
Contact:
Arieh Ovadia
Managing Partner, CEO
Crowe Horwath (Israel)
12 Abba Hillel Silver Street
Ramat-Gan, Israel
Tel: +972 3 7538300
Fax: +972 3 7606787
www.crowehorwath.co.il
__________________________________________________________________________________________________________
Page 67 of 95
Crowe Horwath (Israel)

International Division
____________________________________________________________________________________________________
______
Page 68 of 95
Crowe Horwath (Israel) International Division
Contents
Executive Summary
70
Approach to Audit
74
Our Tax Approach
79
Our Team Approach
81
Firm Code
88
____________________________________________________________________________________________________
______
Page 69 of 95
Section 1
We provide in Israel audit and
other assurance advisory
services to over 1,000 public
and private clients in the HiTech and the technology
industries, HealthCare,
traditional industries, services,
software, communication
service and construction
sectors.
Executive Summary
Crowe Horwath (Israel) International Division
Arieh Ovadia
Managing Partner, CEO
Tel: +972 3 7538300
Mail: arieh.ovadia@crowehorwath.co.il
Contact
Contact
Contact
Contact
Chanoch Pick
Menachem Steinberger
Ronen Leibovitz
Ran Mendelaw
Partner, SME Service
Partner, Technical
Services
Partner public Audit Services
Partner,
Laws
Tel:
+972 3 7538343
Tel:
+972 3 7538341
Tel:
+972 3 7538343
Tel:
+972-7538300
Mail:
Mail:
Menachem.steinberger@crow
ehorwath.co.il
Mail:
Mail:
chanoch.pick@crowehorwath.co.il
ronen.leibivitz@crowehorwath.co.il
Ran.Mendelaw@crowehorwath.co.il
Contact
Contact
Contact
Ora Vaknin
Leonard Tuber
Eli Karov
Tax Services
US Tax Services
Forensic Audit
Tel:
+972 3 7538319
Tel:
+972-7538300
Tel:
+972-75384027
Mail:
Mail:
Mail:
ora.vaknin@crowehorwath.co.il
Leonard.tuber@crowehorwath
.co.il
Eli.karov@crowehorwath.co.il

Page 70 of 95
Encouragement
As a dynamic professional accounting firm Crowe Horwath (Israel) brings significant added
value with a core global integrated engagement team comprises of entrepreneurial,
aggressive leaders with hand-on experience in multination marketplace.
To leverage the scope and efficiency of services to global clients, Crowe Horwath (Israel)
maintains in Israel a US Desk of operations to provide audit and non audit services to Israeli
companies which considered foreign issuers listed companies in the U.S. stock markets and
to non listed companies. This US Desk enables us to perform such service in Israel through
Israeli based leadership for the process.
The International Desk operates by a combine Israeli and foreign UK/US teams of
professionals with extensive International IFAC, SEC/PCAOB, and experience to be able to
provide to global organizations a comprehensive and unique blend of technical know-how,
solid business acumen and specialized industry knowledge and to deliver proactive and
creative ideas through a solid business approach.
What Crowe Horwath (Israel) International Division Offers?
Integrated global audit service provided by one international network
Audit IFRS/U.S. GAAP financial information end compliance to AIM London

and Israeli Security Authority Regulations
We have thorough understanding of our clients' organization with the most

critical perspectives
We provide added value advisory services on continuing basis.
Each member of the client-service team has extensive experience servicing

growing clients, and is motivated to provide the highest quality services.
Our highly talented tax team understands the local and international tax needs
and will provide exceptional service.
Our experience will stand poised to assist you with Joint Venture, Mergers &
Acquisition, providing unique and essential added value and links to the Israeli
and foreign industry and capital markets.
We provide services at reasonable fees, without compromising the quality and

the value of services rendered.
We conduct client satisfaction reviews with management to continually update

and improve our service.
Assistance beyond statutory compliance, for example advice on tax-effective

international group structures
Initial public offerings (IPOs)
Local and international tax compliance and consulting
Cross border transactions and transfer pricing studies
SOX 404 and ISOX compliance and internal audit
ERP implementation
Expatriate services
Due diligence investigations
Employee incentive and compensation plans
Purchase price allocation studies
Management risk analysis
Corporate finance and capital markets

Page 72 of 95
Anticipating management concerns key challenges
Integrated audit service provided by one international network.
Transition will occur in a manner that is smooth efficient and seamless
Expanding strategic partnership and joint ventures with local and foreign
entities.
Enhance opportunities in accordance with the Israeli Income tax Law and
regulations as amended by Tax Reform 2004 and developing tax strategy and
tax minimization opportunities under the Israeli Encouragement Laws for
Capital Investment and Research and Development.

Page 73 of 95
Section 2
Working as a team
Our business depends on
the quality of our people.
Our people work as a
cohesive team with our
clients and with each other
because they share our
aims and our commitment
to provide first class
business solutions and
advice for every one of our
clients.
Approach to Audit
The International audit
The annual audit is an opportunity not an overhead.
Our approach is based on three critical success factors:
a thorough understanding of our clients business, people and

objectives;
an audit team with the right experience and understanding of

the industry; and
An audit team that is well experience with IFAC, SEC/PCAOB

standards.
As well as providing audit information, our approach is used to:
identify possible cost savings
plan for tax
Highlight potential growth opportunities.

Page 74 of 95
Our international audit process
The diagram describes the key stages of our audit approach.
Strategy
Understanding the
factors
Driving operation of the
business and
assessing local
international audit risks
Feedback
Debrief local
international audit
results, incorporate
changes into the plan
Coordinating with
corporate senior
management and local
management in other
locations
Plan the Audit

Focus on key
operational areas
worldwide and potential
high risk areas.
Communicating with
Audit Committee and
the Board of Directors
Reporting
Ongoing communication
of issues worldwide;
improvement
opportunities
Fieldwork
Obtain audit evidence;
analyze financial trends,
audit testing; Partner/
Manager reviews
1. Global Strategy
Our global audit strategy will be based on a sound understanding of your needs and the
issues you are facing. It will ensure that our work complies with local/ international and
US auditing standards.
Our commitment to you is to deliver audits that are based on a detailed grasp of audit
issues, based on IFAC/US GAAS PCAOB, we are also committed to provide you with
a team who are able to discuss technical matters on accounting and compliance issues
and give constructive and practical advice.
Our primary responsibility will always be to the members of your organization an
ancillary responsibility is to help corporate management to carry out their duties with
minimal disruption and maximum help from our audit activities.

Page 75 of 95
Defining a clear global audit strategy at the outset will give both the client and Crowe
Horwath (Israel) International Desk the assurance that:
we understand the strategic issues you facing
our work is in compliance with IFAC/PCAOB auditing standards
we are aware of and comply with any regulatory and legislative requirements,
both current and future and IFRS compliance of financial reporting
We understand your needs and respond to them as appropriate throughout our

audit work.
2. Planning the audit

By completing a comprehensive pre-audit planning exercise prior to the start of audit
assignment, we will be fully conversant with developments within your organization.
To ensure that the audit is adequately planned we will ensure that we meet with the
executive team early on in the process to gain a full understanding of all relevant
accounting and audit issues. We also consider the groups structure, tax issues, VAT
matters and anything else that might have an impact on the audit
Increased efficiency,
lower costs
We believe that detailed
planning by senior staff
and the adoption of a risk
based audit approach will
enable us to provide a
cost effective service that
will exceed your
expectations.
The year-end timetable is also being discussed and agreed upon

and shortly after a formal planning memorandum is submitted
to you, which will include:
audit timetable
meeting dates
key risks and controls
reporting dates
audit milestones
Schedule of deliverables
We will agree the scope of the audit with the Audit Committee and confirm our
independence as auditors before commencing the detailed audit work.
To ensure that we meet the stipulated timetable we will carry out our audits as soon as
the management accounts and year end audit information becomes available.

Page 76 of 95
Our audit fieldwork is designed to ensure that our tests are focused in those areas
where in our judgment the risk of errors is high, and where the likely impact of such
errors would be significant. Each year this will involve:
Reviewing reports and minutes of relevant meetings locally noting any

concerns or requirements that your management may have
Revising our international audit plan for changes in corporate governance

standards, financial systems and controls and other significant financial
matters
Reviewing internal controls and evaluating and testing their reliability locally
using statistically random samples.
Performing detailed substantive tests locally on key areas using monetary

sampling techniques
Subjecting the local and consolidated annual financial statements to detailed

analytical review, examining significant ratios, trends and other statistics,
deviations from average performance of businesses in the same sector and
obtaining explanations for any unusual or unexpected variations.
Reporting
We believe that both formal and informal reporting procedures are needed to ensure
that the audit objectives are achieved and that all parties are aware of their
responsibilities. Specifically we report and consult with management:
at the initial pre-planning stage
at completion of planning
during the audit
at the end of the audit - before issuing our audit opinion and submitting our
draft management letter (if appropriate)
Partner and manager reviews will be conducted locally on-site alongside the
audit team.
Issue communication letter to audit committee, if appropriate.

Page 77 of 95
No surprises
Feedback
Following the initial

planning meeting, we will
give you regular updates
as the work progresses,
to ensure that we meet
your expectations and
that there are no
surprises at the end of
the assignment.
Once we have reached our conclusions, following the resolution of

any audit queries, we will complete our formal audit report. As part
of this process we will provide constructive feedback to
management and report any issues of concern make
recommendations for control improvements and highlight other
issues of interest by submitting a detailed global management
letter.

Page 78 of 95
Section 3
Our Tax Approach
Tax compliance services
Our clients need a cost effective, efficient and timely tax compliance service. We will
aim to gather all of the data necessary to prepare the companies tax computations on
site, during the course of our audit work, and to deliver completed computations at the
conclusion of our audit. This is, however, dependent on management providing the
necessary information at that time.
Tax compliance is an essential part of tax strategy

We regard tax compliance as an essential element of a companys tax strategy, not
least because no tax planning is effective until it has been properly reflected in a
companys financial statements and tax returns, submitted to, and agreed by, the local
tax authority. A companys tax position and the accounting treatment of that position
are rarely objective facts: there are areas which are subjective and where judgment is
required.
Using the audit to carry out a tax health check

Most tax planning which fails does so because of poor implementation, not poor advice.
Our value-added approach to compliance therefore begins with our audit work. We use
this as an opportunity not just to form an opinion on your tax provision, but also to carry
out a tax health check, highlighting areas of risk and opportunity and ensuring that the
tax implications of accounting treatments and disclosures are properly considered. It is
often tax issues identified as a result of this work, and the subsequent preparation of tax
returns, that form a focus for the following years tax planning.
We understand the importance of the Companys reported tax charge: of managing and
meeting the markets expectations and of no surprises. We therefore ensure that the
structural elements of your tax charge are understood and that, where appropriate,
planning is undertaken to address these. We also use this information to help forecast
your future tax rate, identify any trends, and any uncertainties to which these are
subject.
Tax advisory services

Our approach to tax advice is to understand your business and the constraints within
which it operates, and also your risk profile, so that we only bring you planning ideas
which are relevant to your business and its objectives, and also which are likely to meet

Page 79 of 95
your acceptability criteria. We will always present you with a clear value proposition,
explaining both the costs and the expected benefits of any planning, and also where the
planning falls on the risk spectrum.
Our tax advisory services are led by Ora Vaknin who works with our clients to agree
those tax issues and opportunities which are high priority.
Strategy
Understanding your
business and its tax issues
Planning
Tax issues identified during
audit are initial focus for
next years planning
Coordination between
audit and tax team
Communication with
Corporate
Senior management
Reporting
Tax returns delivered at
conclusion of audit.
Tax risks and opportunities
high lighted
Implementation
Implement agreed tax
planning, focusing on
priority risks and
opportunities
Fieldwork
During audit, identify tax
risks and opportunities
and obtain data for tax
computations

Page 80 of 95
Section 4
Our Team Approach
Crowe Horwath (Israel) rank among the 10 leading accountancy and business advisory
firm in Israel.
The firm was established in the early 1980s and operates through a head office in
Ramat Gan, 5 branches which cover all of Israel: Tel Aviv, Jerusalem, Haifa, Ashkelon
and Eilat and an International Division consisting of a Israeli U.S. UK German
Desks of operation.
We deliver a high
quality, value for money
service that clients
can rely on.
Our clients have access
to a full range of
professional solutions of
quality and
commerciality one would
expect from a firm of our
size and repute.
Crowe Horwath International is ranked among the eight largest

accounting and business consulting firms with 140 independent
member firms over 500 offices with 40,000 employees.
The firm provides audit and consulting services to publicly traded
companies on Tel Aviv, NASDAQ and AIM and Frankfurt stock
markets, private SME entities, governmental institutions, nonprofitable organizations, startup and development stage companies.
The firm provides its clients with individual service with a vision
toward maximizing the clients development and growth potential,
whether it is a growth company or a public company establishing
itself as an international player.
The firm service client team consists of CPAs, economists, lawyers,
internal auditors and tax advisors divided to categories by
specialized skills and expertise required for the services in order to
maximize the realization of our technical knowhow and experience
in the different business fields of our clients
The professional relations with Horwath International through the
International Division and US and UK Desk of operation, allow us to
provide response to global clients needs.
Crowe Horwath (Israel) is a dynamic and progressive firm
combining the full range of professional services that you would
expect from a major Israeli accounting practice with a personal,
partner-led service.

Page 81 of 95
Our client service teams include American staff that are engaged with our clients in
Israel and in some cases some of our local staff are temporarily relocated to Horwath
firms outside Israel.
The firm is PCAOB registered to act as CPA for companies trading on US stock
exchanges and registered on TSX Toronto.
Among the firms departments: audit, technical accounting, corporate taxes, economic
services, internal audit, incentive programs and R&D financing, individual services.
Services are provided to both the private and public sectors, in the following fields:
industry, services, high-tech, real estate, commerce and services, financial institutions,
high education institutions, not-for-profit organizations, and others, in a wide range of
areas, such as: international and local taxation, capital raising, mergers and
acquisitions, as well as due diligence, pre-ruling and assisting companies with Sarbanes
Oxley Section 404 implementation.
Crowe Horwath (Israel) provides clients with continuance professional technical
guidance and training in accounting, taxation and business topics through conferences,
seminars and professional news alerts.
Industries:
Public Companies, International Corporations, Government Companies, Private

Companies, Underwriters, Financial Institutions, High-Tech, Start-Up Companies, Real
Estate, Trade and Services, Industry, Technology, Life Sciences and Biotechnology,
Medical Devices, Tourism, Hotels, Professionals, Self-Employed, Non-Profit
Organizations, Capital Markets, Partnerships, Provident Funds, Continuing Education
Funds, Medical Services, Local Authorities and Municipal Associations.
Areas of Practice:
Auditing - Financial Statements, Financial Statements Preparation Based on U.S GAAP,

Public Offerings - Offering Process Accompaniment, Risk Management, Internal Audit,
Sarbanes Oxley Consulting, Preparation of Tax Reports, International Taxation, Tax
Planning, US Tax Compliance and OVI Programs Transfer Pricing, Pre-Ruling,
Approved Enterprises, Governmental Incentives, Global Incentives, R&D Finance,
Mergers and Acquisitions, Economic and Financial Consulting, Due Diligence,
Economic Feasibility Studies, Business Plans, Valuations, Investigative Auditing,
Mediation, Capital Declarations, Expert Professional Opinion for the Court, Arbitration,
Stock Option Plans, Employee Compensation, Reorganization and Recovery Plans,
Trusts, Liquidations.

Page 82 of 95
Our distinctive features
Accessibility and
relationships
Crowe Horwath (Israel) US
Desk provides a pro-active
partner-orientated service.
Our clients tell us they
genuinely value the
accessibility of our
partners who are always
available to act as a
sounding board for ideas
or the provision of
commercial or technical
advice.
Our exponential growth rate, achieved through the

implementation of a clear growth strategy demonstrates
Crowe Horwath (Israel) ability to think and act strategically
over the long-term. This is the same expertise we bring to our
clients, reflecting their individual circumstances and
aspirations
The culture of our firm is characterized by a robust focus on

technical excellence and a dedication to client care
Our clients tell us that they genuinely value the accessibility of

our partners - partners and senior staff are always closely
involved in planning and directing our assignments.
Core team a top level commitment

Our Best Team ethos
We have put together a

team to ensure your
compliance and advisory
requirements are met.
The combined team has
the appropriate blend of
practical experience,
technical expertise and
commercial acumen to
ensure that the service
provided meets your
immediate and future
needs.
We never look at a relationship with our clients as a commodity.

We are in the business of providing comprehensive business
advice, marked by a high level of responsiveness, proactive
identification of issues and, efficiency. Understanding management
concerns is crucial to our relationship. We invest our time to better
understand the business, and to broaden our appreciation for the
corporate philosophy and critical success factors.
We make a substantial commitment of our firm resources to provide
our clients with services that fulfill their expectations. We assemble
an experienced and creative engagement and support our clients'
team. Our professional team is long on the kind of experience that
our clients are seeking. Each team member is dedicated to using his
or her knowledge to better respond and serve our clients' needs.
A core engagement team comprises of entrepreneurial, aggressive leaders

with hand-on experience in multination marketplace.
Wide experience in PCAOB, IFAC and SEC audit.
Wide experience with US GAAP and IFRS reporting
Wide experience with Capital Markets, IPO's, Mergers and Acquisitions.

Page 83 of 95
Brief description of the International Division leaders
Arieh is the managing partner of the firm and takes overall responsibility for
all work that Crowe Horwath (Israel) International Division does.
He heads the International Division and the SEC practice group of
Crowe Horwath (Israel) and has over 20 years of experience in both
Israeli and US public and private accounting.
Arieh Ovadia
Managing Partner
+972 3753 8300
Arieh.ovadia@crowehorwath.co.il
Arieh acts for a wide range of very active public clients and international
groups, including a number of fully-listed companies on NASDAQ, AIM
London Frankfurt and Tel-Aviv Stock Exchange reporting under PCAOB,
US GAAP and IFRS. He has extensive experience with M&A transactions,
due diligence for acquisitions and for underwriters, Sarbanes Oxley
implementation testing, valuation and PPA Study and in strategic and
business planning.
Menachem is the Technical Partner of the firm's US Desk and Head of

the Crowe Horwath Israel IFRS Academy
He has 25 years of experience in dealing with publicly quoted companies,
of which more than 15 years of experience in technical accounting
services US GAAP and IFRS and regulatory requirements.
Menachem Steinberger
SEC Technical Partner
US GAAP IFRS
+972 37538300
Serve 2 years in PWC Central Team in London providing global IFRS

advisory services to territories around the world and responding to the
IASB initiatives.
A member of the Accounting Principles and Financial Reporting
Committee of the Institute of Certified Public Accountants in Israel.
Menachem.steinberger@crowehorwath.co.il

Page 84 of 95
Ronen acts for a wide range of very active public clients and international
groups, including a number of fully-listed companies Tel-Aviv Stock Exchange
and a big Government companies reporting under PCAOB, IFAC and IFRS.
Ronen has extensive experience with M&A transactions, due diligence for
acquisitions and for underwriters, Sarbanes Oxley implementation testing and in
strategic and business plan.
Ronen was serving in DELOITTE with 20 years of experience in leading several
engagements of public companies (including IPOs), big governments companies
and a privet companies.
Ronen was responsible of the internal practice review in Deloitte Israel.
Ronen is a member of the Accounting Principles and Financial Reporting
Committee of the Institute of Certified Public Accountants in Israel.
Ronen is a member and a reviewer at the organization of Peer Reviewers
for the Institute of Certified Public Accountants in Israel.
Ronen Leibovitz
Partner,
+972 37538300
Ronen.Leibovitz@crowehorwath.co.il
Ran Mendelaw is responsible to perform the audit and coordinate the audit
team and the communication with CHW and assigned NOMAD.
Ran acts for a wide range of very active public clients and international
groups, including a number of fully-listed companies Tel-Aviv Stock
Exchange, AIM London, auditing under PCAOB standards, reporting under
US GAAP and IFRS. Ran has extensive experience with M&A
transactions, due diligence for acquisitions and for underwriters, Sarbanes
Oxley implementation testing and in strategic and business plan and
valuation services.
Ran Mendelaw
Audit Partner
+972 3753 8300
ran.mendelaw@crowehorwath.co.il
Ran was serving in PwC with 10 years of experience in leading several

engagements of public companies (including IPOs), big Hi-Tech
companies and a privet companies.

Page 85 of 95
Leonard is the head of our US tax services. He has More than 10 years of
experience in the areas of US taxation, international financial reporting and
accounting. Leonard has held various positions in accounting firms
specialist in US tax and well as accounting position in Israeli Hi -Tech
companies.
Leonard specialists in advising clients regarding very sensitive and discrete
issues of US tax compliance as part of a US government amnesty program
(OVDI). Leonard specialists in the preparation of US federal individual
partnership, corporation, gift, estate and state tax returns. Leonard has
experience in the areas of US taxation of foreign corporations and foreign
investments in US real estate. Leonard manages the US tax compliance
group of Crowe Horwath Israel in joint venture with US Tax & Financial
Services Middle East GmbH.
Leonard Tuber
Partner,
Head of US tax services
+972 37538300
leonard.tuber@crowehorwath.co.il
Ora is the head of our Tax services. Ora is a tax lawyer (L.L.B& M.B.A) who
made her internship at The Israeli State Attorney. Ora has specialized in legal
examination and analysis of tax issues, assistance with tax structuring in
relation to business, as well as personal activities, tax opinion writing,
representation with the Israeli Income Tax Authority on all of its levels,
including with the Real Estate Taxation Section.
As a part of our service we provides Tax services including Corporate Tax
Compliance, Employment Tax, International Tax, Cross border transaction,
Relocation tax Services, Pre-Ruling, Personal Tax compliance, VAT ,Real
Estate Taxation, Governmental Incentives Plan, Transfer Pricing.
Ora Vaknin
Head of Tax services
+972 37538300

Page 86 of 95
Eli Karov is a Certified Public Accountant.
Eli Karov
Forensic Audit
+972 3753 8300
Eli.karov@crowehorwath.co.il
Eli has an experience with private and public companies reporting

under Israeli GAAP, IFRS, US GAAP and IPO processes in Tel Aviv
Stock Exchange and AIM London.
Extensive experience of performing engagement of forensic
examination and Investigation audit.
High skills and experience in mapping critical processes and
formulating procedures for implementing organizational controls. Edit,
review and audit financial statements and consolidated financial
statements of public companies according to ISA regulations and
IFRS In the following fields: High-Tech, Real Estate, Mineral Mining
etc.

Page 87 of 95
Section 5
Firm Code
Crowe Horwath (Israel) is a professional corporation engaged in the practice of public
accounting in Israel.
Crowe Horwath (Israel) is committed to conduct its business in a manner consistent
with all legal, regulatory and professional requirements, which pertain to its practice, and
in all instances in a manner, which is consistent with the highest standards of integrity
ethics and fairness.
The success of Crowe Horwath (Israel) is due, in no small measure, to our reputation
for the highest standards of integrity and ethical conduct. Partners and staff share the
collective responsibility that reputation by conducting the business of the firm fairly,
ethically and responsibly and in a manner that is fully in compliance with all relevant
legal, regulatory and professional requirements. Each of the partners and staff must
comply conscientiously with all laws and government and professional regulations
applying with the business of the firm. The firm requires that each partner and staff
member understand and abide by the requirements and procedures out in this firm's
Code.
Each of the partners and staff is responsible for being familiar with all laws, regulations
and professional requirements, which are relevant to our areas of practice or
responsibility.
A violation of this Code may result in disciplinary action including, in the extreme,
termination of employment, withdrawal from the firm and referring of the matter to
appropriate legal or professional authorities. Investigations and disciplinary decisions
will be made by the firms Authorized Partners and will be subject to review by the
Partners Authorized.
Our responsibility for protecting the reputation of the firm extends beyond our own
actions and includes an obligation to bring to the attention of the Management
Committee legal or ethical issues with respect to the conduct of other firm's partner and
staff members. The firm fully supports in carrying out this responsibility.
We have an overriding objective of providing high quality audit, accounting, tax and
advisory services to clients in the best professional manner. Our partners and staff are
expected to comply with this statement of philosophy in order to achieve that objective.

Page 88 of 95
Professionalism in the accounting profession means integrity, objectivity,
independence where required, adherence to professional standards and applicable laws
and regulations, and a demonstrated will to maintain and improve the quality of
professional services and to withstand all pressures, competitive and otherwise, to
compromise on principles, standards and quality. In the field of auditing particularly,
professionalism requires an understanding of and dedication to public interest.
The public interest in audited financial statements has placed the public accounting
profession in a unique position of public trust. Moreover, there is also a significant public
interest in the way in which the firm carries out accounting, tax and advisory services.
Therefore, no client or firm consideration is allowed to interfere with our ability to carry
out our commitment to professionalism.
Professional Performance
Crowe Horwath (Israel) demands integrity, objectivity, competence and due care from
all of its personnel in the conduct of all of its engagements, whatever their nature. We
demand independence in fact and appearance in all audit and other engagements
where independence is required by applicable laws and regulation and the requirements
of professional societies. We take steps to ensure that personnel assigned to
engagements, whatever their nature, have the professional and specialized knowledge
required to carry out their responsibilities, recognizing that supervisors and other
reviewers and consultants can complement that knowledge.
Crowe Horwath (Israel) subscribes to a standard of professional excellence in all of its
activities. Our goal is to provide superior, distinctive client services services that are
prompt, efficient, authoritative, performed to the highest standard of quality and ethics
responsive to client needs, and available when and where needed. Crowe Horwath
(Israel) services must be the best obtainable.
Our firm is structured to provide leadership in achieving high quality professional
performance while maintaining the concept of individual responsibility so necessary to
clients and to individuals within the firm. Crowe Horwath (Israel) has established
policies and procedures that we believe provide assurance that professional
engagements are properly planned and executed and that decisions are based on the
substance of issues, not on form. Accounting standards cannot deal with all possible
situations, and we at times urge our clients to adopt accounting and reporting policies
that we believe are the most appropriate in the circumstances.
Our policies and procedures provide, among other things, for consultation on significant
matters and Crowe Horwath (Israel) has designated partners of the firm whose
opinions are to be sought on significant ethical, technical and industry questions. The
policies and procedures we have established are designed to assure that our clients
Page 89 of 95
receive those best professional services we can provide and that in providing those
services we continually keep in mind the public interest in our work. We expect our
partners and staff to identify and resolve all important issues relevant to an
engagement. More specifically, to achieve high quality professional performance, and to
comply with the membership requirements of the Israeli AICPA. Crowe Horwath
(Israel) has adopted policies and procedures that implement the quality control
standards for the conduct of accounting and auditing engagements established by the
US AICPA. Those policies and procedures relate to the following elements of quality
control, among other matters:
Independence, Integrity and Objectivity
To be free from financial, business, family and other relationships involving a client
when required.
To be honest and candid within the constraints of client confidentiality.
To have a state of mind and a quality that lends value to the firms services and imposes
the obligation to be impartial, intellectually honest, and free of conflicts of interest.
Personnel Management
To hire individuals who possess the appropriate characteristics to enable them to
perform competently.
To assign work to personnel who possess the technical training and competence
required.
To provide personnel with the training necessary to fulfill responsibilities assigned and
satisfy applicable continuing professional education requirements.
To select for advancement those individuals that have the qualifications necessary to
fulfill responsibilities involved.
Acceptance and Continuance of Clients and Engagements
To appropriately consider the risks associated with providing professional services so as
to decrease the likelihood of association by the firm with clients and engagements in
which client management lacks integrity.
To associate with clients and engagements in which the firm can reasonably expect to
complete with professional competence.

Page 90 of 95
Engagement Performance
To determine that the design and execution of work performed is efficient and in
accordance with applicable professional standards.
To have personnel refer to authoritative literature or other sources and consult with
individuals with the knowledge, technical competency, judgment, and authority when
appropriate.
The audit work performed on every client engagements is to be supervised to the extent
necessary to ensure the highest quality of professional performance.
Monitoring
To develop a system to evaluate on an ongoing basis whether the other elements of
quality control established by the firm are partially designed and are being effectively
applied.
We have also adopted appropriate policies and procedures in the above areas to guide
the conduct of tax and advisory services engagements.
The adequacy of the firms quality control system for our accounting and auditing
practice and our compliance with that system are independently evaluated every three
years through a peer review conducted under the auspices of the Israeli AICPA Peer
Review Institution for CPA Firms. The peer review report is available to our clients.
Relationships with Clients
The value of our services is, to a large degree, dependent on the public perception of
our integrity and objectivity. If the public were to doubt our integrity or objectivity or our
competence or professional care as a result of our work for a given client, the value of
our services to that client, to all other clients, and to the public at large, could drop
significantly. Accordingly, just as our clients are selective in their choice of CPA firms,
Crowe Horwath (Israel) is selective in accepting clients. Our responsibilities to existing
clients and to the public demand that we consider the appropriateness of client
relationships and that we carefully consider the nature of services we are asked to
provide and our ability to provide those services in a quality manner in conformity with
all relevant professional standards.
When potential clients who disagree with their present auditors on significant auditing,
accounting, or reporting questions request our opinion on the matter, we consult within
our firm and with the potential clients present or predecessor CPA firm before giving our
final conclusion on the matter.

Page 91 of 95
We value our reputation for quality services and believe that reputation is the basis on
which we attract new clients and build our practice for the future. We are committed to
rendering value for our fees and believe our clients should have a reasonable basis for
making that judgment for themselves. Accordingly, we carefully evaluate the services
we are asked to provide and the factors, such as the nature of control systems and
procedures, that will affect the costs we expect to incur in providing such services
before we inform present and potential clients of the fees we estimate those services
will entail. Once Crowe Horwath (Israel) undertakes a client engagement, we bring all
the resources to the engagement necessary in the circumstances.
We do not disclose to anyone outside of our firm any confidential client information
obtained in the course of any engagement, unless the disclosure is authorized by the
client or is required to discharge properly our responsibilities under law or authoritative
regulatory or professional standards. (Our peer reviewers have access to client
information, but they are bound by the same standards of confidentiality.)
Services Provided
Crowe Horwath (Israel) provides a full range of audit, accounting, tax and advisory
services, consistent with ethical and professional standards and regulatory requirements
and with the limitations imposed by our firms membership in the Israeli AICPA.
The services provided by CPA firms must be responsive to changes in the environment,
which is affected by development in information technology, the increasing complexity of
tax laws and regulations, greater demands by the public for new types of information
and CPA assurances on such information, the increasing need of many clients for
advisory services, and a host of other factors.
If the public accounting profession as a whole and Crowe Horwath (Israel) in particular,
are to meet the legitimate and changing needs of clients and the public, arbitrary
restrictions on the services provided are not appropriate. However, Crowe Horwath
(Israel) as a matter of policy will undertake only engagements that we believe we can
perform with competence, that will be useful to our clients or to appropriate third parties,
that will not impair our independence in fact or appearance when we also provide audit
services to the client involved, and that will help attract and retain the personnel we
need to provide the knowledge base essential to maintain our ability to serve our clients
and the public in a professional manner. In evaluating proposed engagements, as well
as the way we inform clients and others of our capabilities, we consider whether such
engagements will lessen public confidence in our independence, integrity and objectivity
in the performance of the audit function or in our commitment to that function.

Page 92 of 95
Proposals
Every proposal, whether written or oral, should be prepared carefully in terms of its two
principal purposes: as an affective display of the firms capabilities and as an articulation
of the commitments the firm is undertaking.
Fees
The firm charges clients comparable fees for equivalent services. In determining the
rates at which individual engagements should be billed, various criteria, including cost
and service-related economic factors, are considered.
Fee estimates furnished to prospective clients should be based upon estimated time
charges modified, as appropriate, in the partners business judgment.
Maintenance of auditing standards is mandatory irrespective of time budgets supporting
fee estimates.
Growth of the Practice
Quality service and aggressive pursuit of attractive market opportunities are not
mutually exclusive. Crowe Horwath (Israel) competes for new business by assigning
specific roles in achieving firm goals to practice units and individual partners.
The firm actively seeks to augment its competitive position by committing resources to
the development of services oriented to emerging business needs and to the
maintenance of a strong base of specialized skills.
All partners are expected to develop their associations with business and professional
leaders and to encourage each staff member to become known in the community as a
representative of the firm.

Page 93 of 95
Accounting Advice
Clients - The firm has a responsibility to every client to provide its best professional
accounting advice on every occasion.
The firm will not ordinarily demand compliance with a standard higher than that extant in
practice. However, the firm always reserves the right to refuse to accept certain
practices when it believes the practice is indefensible however displayed and disclosed,
even though that practice is accepted by some members of the profession.
The Authorized Partners are responsible for developing firm positions and providing
technical guidance on matters of accounting principle including disclosure.
Non-clients - The firm accepts engagements to furnish technical advice to a client of
another accounting firm on two conditions: (1) the firm must be able to comply fully with
applicable professional standards, and (2) acceptance of the engagement must be
approved in advance by the Authorized Partners. If a written opinion is furnished by the
firm, it should be reviewed with the other firm prior to issuance.
Positions on Issues
The firm is prepared to speak out publicly, unhesitatingly, on any issue that lies within its
professional field.
It is the firms judgment as to action that is in the public interest, and consonant with
sound principles of accounting. Firms position, rather than the desires of one or more
clients.
Compliance with this Statement
At least once a year, partners and professional staff will be requested to acknowledge
their understanding of, and compliance with, this statement.

Page 94 of 95
Contact Information
Head Office
12 Abba Hillel Silver St. Ramat Gan, Israel
Tel: +972-3-7538300; Fax: +972-3-7606787
www.crowehorwath.net/il
Arieh Ovadia
Chanoch Pick
Alexander Kriheli
Head of the Firm and Managing Partner
Partner
Partner, Office Manager Ashkelon
arieh.ovadia@crowehorwath.co.il
chanoch.pick@crowehorwath.co.il
Ronen Leibovitz
Ran Mendelaw
Menachem Stienberger
Partner
Partner, Encouragement Laws
Partner, Technical Accounting Services
ronen.leibovitz@crowehorwath.co.il
ran.mendelaw@crowehorwath.co.il
alexander.kriheli@crowehorwath.co.il
menachem.stienberger@crowehorwath.co.il
Leonard Tuber
Yaniv Cohen
Eli Karov
US Tax Compliance
Economic and Valuation Services
Forensic Audit
leonard.tuber@crowehorwath.co.il
yaniv.cohen@crowehorwath.co.il
eli.karov@crowehorwath.co.il
Ora Vaknin
Daniel Edenburg
Tax Services
Risk Management and Internal Audit
daniel.edenburg@crowehorwath.co.il

Page 95 of 95

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Doing business in Israel 2016

Crowe Horwath (Israel) Doing business in Israel 2014

Doing business in Israel 2016

Business Entities and Accounting

Employment Regulations and Social

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing business in Israel 2016

News and Updates

Withholding Taxes on Dividend Payments

Crow e Horw ath (Israel) Firm Profile

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing business in Israel 2016

Israel-European Union Agreements

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing business in Israel 2016

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing business in Israel 2016

A mixture of private enterprises and Government controlled enterprises characterizes

Doing business in Israel 2016

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing business in Israel 2016

Business Entities and Accounting

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing Business in Israel 2016

A private company may have between 1 to 50 shareholders.

Annual financial statements, prepared according to generally accepted

There may be restrictions, upon shareholders agreement, on the transfer of a

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing Business in Israel 2016

A public company must have at least 7 shareholders, with no maximum

There should not be any restrictions on the transfer of a public companys

Publish annual audited financial statements and quarterly unaudited (but

Appoint an audit committee, comprised of at least three directors, two of

Appoint an internal auditor.

File annual and quarterly reports to the Registrar of Companies, TASE

Any offer to the public must be through a published prospectus

Make an immediate announcement of any major event

The Partnership Ordinance governs the activities of partnerships. If a partnership is

Doing Business in Israel 2016

A partnership cannot comprise more than 20 partners.

A partnership may be general or limited.

Audit and Accounting Requirements

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing business in Israel 2016

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing Business in Israel 2016

There are no exchange controls in Israel on inward or outward investment. Foreign

Stock Exchanges and Trading Facilities

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing Business in Israel 2016

Venture Capital Companies

The Law to Prevent Money Laundering

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing Business in Israel 2016

No Assistance to Money Launderers

Transactions which exceeds defined amounts.

Unusual transactions transactions which appear to be unusual in light of the

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing Business in Israel 2016

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing Business in Israel 2016

Article 4: INVESTMENT INCENTIVES

Crowe Horwath (Israel) Doing Business in Israel 2016

Doing Business in Israel 2016