The new tax regime for high-tech companies, as part of the Israeli government's efforts to help the high-tech sector, has been revealed by Minister of Finance Moshe Kahlon at a meeting with some of the country's leading high-tech executives. The plan, which includes the reduction of companies tax from 25% to 12% or even 6% in some instances, and the reduction of dividends tax from 20% to 4%, will be submitted to the cabinet for approval next week as part of the Economic Arrangements Law.
Two weeks after declaring that there would be new tax tracks to help high-tech companies, Kahlon and senior Ministry of Finance officials met yesterday with top executives from Israeli high-tech companies including Checkpoint, Wix, Taboola, SimiliarWeb, Gett, Fiverr, SolarEdge, ironSource, Outbrain and CyberArk. Also present at the meeting were representatives of US tech giant Broadcom.
Kahlon and his staff presented the solutions they are promoting in response to the harsh criticism voiced by Israeli high-tech entrepreneurs at a meeting six months ago, claiming that government conduct was hurting the development of the country's high-tech sector. The main charge was over uncertainty on tax policy on deals and related payments so that there could be no way of knowing the final cost of selling a startup company. They explained that the ruling procedures of the Israel Tax Authority were far longer than in the US and there was no way of predicting the outcome. The Ministry of Finance proposes a new fast track path in the Economic Arrangements Law that would not require ruling. Furthermore, exits in which the cash payment does not exceed 40% will not be subject to tax at all.
The high-tech entrepreneurs had also complained about contradictions between the regulations of the US Securities Exchange Commission (SEC) and Israeli regulations. To solve this problem the Economic Arrangements Law includes the cancellation of several instructions in Israel's Companies Law. Dual-listed companies will also be allowed to report in English and there will be reductions in costs.
Kahlon told those present at the meeting that the new reduced taxes would position Israel as a more attractive location for international high-tech companies and expressed the hope that they would continue to invest billions of dollars in the country. He said, "The time has come for the Israeli government to pick itself up and become a partner in pushing you to new achievements.
Ministry of Economy and Industry Chief Scientist Avi Hasson said that the new rules, "Were an offensive rather than defensive measure. Until now we've just got to the changing rooms. Now we are putting on our kit and going out onto the sports field."
The response from those attending the meeting was essentially positive. Wix president Nir Zohar said, "The reform in taxation for high-tech companies is important but the very fact that high-tech companies are now being defined with a simple tax track created is clearly at the heart of the reform and an important and healthy change for the future. If we want to win the struggle for the startup nation in the long term, then we must be teaching courses to youngsters when they are still in kindergarten."
EY Israel Tax Department head Sharon Shulman said, "This legislation is very dramatic for Israeli high-tech. There won't be another event like this for the next 20-30 years. It's a brave and smart move and it was not for nothing that it has been complemented by the Wall Street Journal."
SimilarWeb founder and CEO Or Ofer, "Progress has been exceptional and is not typical of the government. We're really beginning to feel a change in the atmosphere."
Broadcom VP Dr. Shlomo Markel said, "I very much hope that the Knesset doesn't ruing things for this law."
Published by Globes [online], Israel business news - www.globes-online.com - on August 4, 2016
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