1. Tax Incentives for the Encouragement and Development of the Hi-Tech Industry
March 2012

2. Allowed Expense on Investments in Equity by Individuals Ad Hoc Provisions (1.1.11-31.12.15)
An ad hoc law allows an individual who invests in a qualified company to deduct the total investment in equity, for up to 3 years, at his discretion, as an expense against various types of income.
In the event that, in a given tax year, the investor has various types of income that are subject to different tax rates, the investor can choose how to deduct the expense and how it is allocated between the different types of income (there is no obligation to deduct the expense).

3. Approval of the Chief Scientist
Allowed Expense on Investments in Equity by Individuals— Terms and Conditions for the Deduction
Purchased Company
(Target Company)
Individual
Israeli company whose shares are not listed on a stock exchange
Owner of issued shares during the benefit period (3 years)
At least 75% of the investment is used for R&D expenditures (No later than the benefit period) + During all the years of the tax benefit (until the above condition has been achieved),
R&D expenditures are at least 70% of total company expenses
At least 75% of R&D expenditures during the benefit period were expensed in Israel
During the first two tax years, the company’s revenue was not in excess of 50% of R&D expenditures
R&D expenditures were for the advancement or development of the company’s own production activities
Neither tax avoidance nor improper tax reduction are the main objectives of the said investment
Approval of the Chief Scientist

4. Allowed Expense on Investments in Equity by Individuals Tax Authority Bulletin
Tax authorities recently issued a bulletin on the ad hoc provisions allowing the cost of investment in the equity of a qualified company by an individual as an expense. The following are excerpts from the bulletin:
Maximum investment amount - in relation to the investor (including “a relative") for the investment in a qualified company (in the aggregate and not for each year separately), the investment limit (NIS 5 million) is only with regard to qualified investments and not with regard to the total investment in the company (some of which may have been invested previously) .
Expense deductions by the investor - ✔ The investor can deduct the amount spent for investment in equity that relates to the tax
years of his choice. For example – the entire deduction during the first year or the last
year of the benefit period (the deduction cannot be in excess of total taxable income). ✔ In the event of non-compliance with conditions - the benefit will be retroactively
cancelled with regard to the disallowance of the related expenses as a deduction against
taxable income.
Types of investors - ✔ Investment by a close-family company will not be considered a qualified investment by
an individual. In the event of investment by a partnership / trustee of a trust, one must
contact the Professional Practice Department of the Tax Authority for pre-approval. ✔ A non-resident investor can also claim the benefit, subject to conditions, against the
income taxable in Israel of the investor (even though in some cases, the sale of equity
will be exempt from tax).

5. Allowed Expense on Investments in Equity by Individuals Tax Authority Bulletin cont’d
Conditions of R&D allocation by the investor
1. The deduction will only relate to R&D expenditures that were expensed after the beginning of the tax year in which the investment was made, and paid by the end of the term of the qualifying benefit. Expenses from previous years do not qualify. 2. Converting a loan into shares - R&D expenditures will only be taken into account from the date of conversion of the loan, and no later than the end of the term of the benefit. 3. Exercise of stock options - considered a qualified investment when the options have been exercised and exercise price has been paid (employee options do not qualify). 4. If several qualified investments are made, the allocation of the R&D expenses are performed using the FIFO method, in the order that the investments were made.
5. The verification of the existence of this condition will be performed separately for each allocation and not for each tax year, even if the same investor made several investments.
Procedural and administrative guidelines
✔ An investor who wishes to claim the deduction shall notify the qualified company
around the time of investment. ✔ In the event that the investor is not compliant with conditions, he shall inform the
tax office and shall file a corrected report. ✔ Every year, the qualified company shall report to each investor the expenditure
attributed to him thus far, approved by the Office of the Chief Scientist. ✔ The qualified company shall attach to the annual report a CPA-approved summary
report, the details of all investments, the allocation of R&D expenses between the various
investors, and the status of their fulfillment of the applicable conditions.

6. התרת השקעה במניות על ידי יחיד כהוצאה דוגמא להפחתה
התרת השקעה במניות על ידי יחיד כהוצאה דוגמא להפחתה
יחיד (שכיר) השקיע במהלך שנת 2011 סך של 600,000 ₪ בחברה העונה להגדרת 'חברת מטרה' (אשר קיבלה את האישורים הנדרשים). ליחיד הכנסות ממשכורת בלבד במהלך שנות ההטבה (אין הכנסות ממקורות אחרים).
ליחיד קיימת אפשרות לבחור את אופן הפחתת ההשקעה, לדוגמא -
* סך ההכנסה נטו מגיעה למדרגת המס השולי החייבת בשיעור מס 30%, כך שלמעשה המס שנחסך הינו בשיעור 33%.
לחילופין, ניתן היה להפחית את ההשקעה בדרך אחרת -
* לא ניתן לדרוש כניכוי סכום העולה על ההכנסה החייבת באותה שנה.
2013
2012
2011
480,000
450,000
400,000
שכר שנתי
(260,000)
(190,000)
(150,000)
פריסה ל-3 שנים
220,000
260,000
250,000
סה"כ הכנסה*
2013
2012
2011
480,000
450,000
400,000
שכר שנתי -
(200,000)
(400,000)
פריסה
250,000 *-
סה"כ הכנסה

7. Goal: to keep the technological know-how within Israel.
Allowed Expense on Investments in Equity by Companies Ad Hoc Provisions
Term:
Content: An Israeli technology company that purchases 80% of an Israeli start-up company— each of which own IP— can deduct the amount over five years.
Objective: To encourage Israeli Hi-tech companies to purchase Israeli start-up companies
Goal: to keep the technological know-how within Israel.
Purchase price
(-) Equity, premium and retained earnings
Total deductible amount over five years

8. Purchased Company, beginning Year 2 Investing Company
Allowed Expense on Investments in Equity by Companies— Terms and Conditions for the Deduction
Approval of the Chief Scientist
Approval of the Chief Scientist
Purchased Company, beginning Year 2
Investing Company
Israeli company– the control of the company is in Israel
A beneficiary enterprise or preferred company
under the Law for the Encouragement of Capital Investments
R&D expenses are 7% of turnover
25% in the year of purchase
20% university graduates
40% in the year of purchase
Securities are not listed on a stock exchange
Prohibition to own more than 25% during the 12 months prior to purchase
Control of another entity only if immaterial and an integral part of the company
The first 3 years of R&D are for the promotion/development of own production activities with the investing/purchased company and 75% within Israel

9. התרת השקעה במניות על ידי חברה כהוצאה אישור מיוחד
התרת השקעה במניות על ידי חברה כהוצאה אישור מיוחד
אישור מנהל רשות המיסים שהימנעות ממס או הפחתת
מס בלתי נאותות אינן בין המטרות העיקריות של הרכישה

10. התרת השקעה במניות על ידי חברה כהוצאה דגשים לחברה הרוכשת
התרת השקעה במניות על ידי חברה כהוצאה דגשים לחברה הרוכשת
במהלך הרכישה/D.D יש לבחון התקיימות התנאים בנרכשת לצורך הערכת חסכון המס הפוטנציאלי.
יש לתכנן נכון את הרכישה על מנת למקסם את הסכום המותר להפחתה, לדוגמא במקרה של רכישת הלוואות/שטרי הון בנוסף למניות.
יש לשים לב כי אחד מתכנוני המס החייבים בדיווח הינו רכישת חברה בעלת הפסדים בסך 3 מיליון ₪ ומעלה

11. רו"ח דיויד קריסמן, שותף KPMG סומך חייקין

12. המידע המוצג כאן הינו בעל אופי כללי ואינו מיועד לענות על הצרכים הייחודיים של כל יחיד או ישות. אף על פי שאנו משתדלים לספק מידע מדויק וזמין, אין באפשרותנו להבטיח את עדכניות המידע ביום בו הוא מתקבל וכן כי המידע ימשיך להיות מדויק גם בעתיד.אין לפעול לפי המידע המוצג ללא ייעוץ מקצועי מתאים לאחר בדיקה מקיפה ויסודית של המצב הספציפי.
(“KPMG International”) KPMG International Cooperativeהינה ישות שוויצרית. פירמות החברות ברשת של פירמות עצמאיות של KPMG מסונפות ל KPMG International - . KPMG International אינה מספקת שירותים ללקוחות. לאף פירמה החברה ברשת אין סמכות לחייב את KPMG International או כל פירמה אחרת החברה ברשת כלפי צדדים שלישיים ול- KPMG International אין סמכות כזו לחייב כל פירמה החברה ברשת.
KPMG, הלוגו והביטוי "cutting through complexity" הינם סימנים מסחריים רשומים או סימנים מסחריים של KPMG International.