Israel-based Teva is taking its business elsewhere — at least part of it.
The pharmaceutical giant has announced that it will no longer file for patents in Israel for products developed in the country, preferring to do so in Switzerland instead. In Switzerland, Teva will be able to take advantage of tax exemptions and incentives that are not available in Israel for development, manufacturing and registering patents, Globes reported, quoting “sources.”
Teva has been paying almost no tax in Israel, thanks to the Law for the Encouragement of Capital Investment, drawn up for the benefit of companies manufacturing in Israel.
However, for registering patents without subsequent manufacturing, Israel offers no tax breaks. Furthermore, production activities that are not completely undertaken in Israel and are part of the chain that includes activities by companies abroad are also not eligible for tax breaks.
The decision came after senior executives at Teva made inquiries with government officials about the possibility of creating a tax-break mechanism in Israel for registering patents comparable with what the Swiss offer. But it appears unlikely that Israel will change its policy.
Although Israel will lose revenue it would have received from the Teva patents, officials said they fear that such a patent tax-break unlinked to manufacturing could result in factories being transferred out of Israel.
Billions of dollars in potential profits are at stake, and for Teva a saving of just a few percentage points can make a difference of hundreds of millions of dollars.
Teva said in response, “We wish to emphasize that Teva’s intellectual property registered or developed in Israel will remain here. Teva’s IP, as gained from developments and acquisitions that were performed worldwide, is registered in different countries. This policy remains unchanged. Teva will be more than happy to transfer to Israel its IP assets developed and registered in other countries, should the Israeli tax regulations allow more competitive tax rates compared with other countries.”