Israel's budget confirms expansion of IP incentives for tech
Israel's budget for 2017-18 confirms some measures for tech companies announced last year, with the changes applying from 1 January 2017.
Firstly, the budget reiterates the 'innovation box' regime proposed last year, introducing a 6% corporate income tax on 'technological earnings'.
The budget also expands on the tax incentives for 'preferred technological enterprises' and 'special preferred technological enterprises':
For PTEs:
- the corporate tax rate is 12% instead of 24% on tech earnings (or lower, if in a development area)
- the withholding tax on dividends out of tech earnings of qualifying companies is reduced to 4% (unless lower by treaty)
- the capital gains tax rate on the sale of qualifying intangibles to a related nonresident is reduced to 12% where the assets were bought from a non-resident (unusual to see a tax incentive for outbound sales of IP)
For SPTEs:
- the corporate tax rate is 6% on tech earnings
- the withholding tax rate on dividends of tech earnings is reduced, as above; the withholding tax rate on all dividends to a nonresident parent is reduced to 5% (unless lower by treaty)
- the capital gains tax rate on qualifying intangibles (as above) is 6%
- the requirements to be an SPTE are modified, reducing the required preferred income by one third, and total required annual income by half
Firstly, the budget reiterates the 'innovation box' regime proposed last year, introducing a 6% corporate income tax on 'technological earnings'.
The budget also expands on the tax incentives for 'preferred technological enterprises' and 'special preferred technological enterprises':
For PTEs:
- the corporate tax rate is 12% instead of 24% on tech earnings (or lower, if in a development area)
- the withholding tax on dividends out of tech earnings of qualifying companies is reduced to 4% (unless lower by treaty)
- the capital gains tax rate on the sale of qualifying intangibles to a related nonresident is reduced to 12% where the assets were bought from a non-resident (unusual to see a tax incentive for outbound sales of IP)
For SPTEs:
- the corporate tax rate is 6% on tech earnings
- the withholding tax rate on dividends of tech earnings is reduced, as above; the withholding tax rate on all dividends to a nonresident parent is reduced to 5% (unless lower by treaty)
- the capital gains tax rate on qualifying intangibles (as above) is 6%
- the requirements to be an SPTE are modified, reducing the required preferred income by one third, and total required annual income by half
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