A draft proposal for a renewal of tax benefits for individual investors
Published on August 18, 2022 as ‘Encouragement of Knowledge-Intensive Industry’ (Temporary Order), 5772-2022.
After previous similar successful tax benefits of the Law for the Budget 2011 – 2012 (Legislative Amendments), 5771-2011 had expired, the renewal proposal aims to give:
- a tax credit for an individual, and to certain companies that are ‘individually owned’ or ‘tax transparent’, in relation to an investment in a start-up company of up to an amount of 25% of the amount invested (up to 3,5 M NIS – approx. 3 M U$);
- deferral of payment of tax on a gain from the sale of shares of a “preferred company” which owns a “technological enterprise” when a new investment in an R&D company is made, or when there is a share for share exchange;
- recognition of the amount of the investment in shares as an “expense” for tax purposes for the individual investor;
- an exemption from withholding tax for foreign ‘financial institutions’ on interest, share discounts and linkage differentials, paid by a qualifying Israel company in relation to (convertible) loans received at least 10 M U$ received from such foreign institutions.
In addition, it has been proposed to extend the possibility to recognize a tax offsetable ‘loss’ equal to the amount invested in an Israel R&D company (at the occasion of a public offering) until end of 2028 up to an investment amount of NIS 5 million (approx. 1,45 M U$).
