A Custom-Designed Tax Plan for High Tech

Israel’s beleagured high-tech industry can look to significant tax relief next year, if Minister of Finance Moshe Kahlon’s proposals are included in the final budget for 2017-18.

Kahlon, who unveiled his plan at a meeting with leading high-tech executives on Thursday, proposed the reduction of companies tax from 25 percent to 12 percent or even six percent in some instances, and the reduction of dividends tax from 20 percent to four percent. The plan will go before the cabinet next week as part of the Economic Arrangements Law.

In attendance were top officials from Checkpoint, Wix, Taboola, SimiliarWeb, Gett, Fiverr, SolarEdge, ironSource, Outbrain and CyberArk. Also present at the meeting were representatives of U.S. tech giant Broadcom.

The plan came about in response to recent complaints from the industry that government policies have been causing stagnation and uncertainty.

Among the obstacles to business, they cited the ruling procedures of the Israel Tax Authority as far longer than in the U.S. To remedy that, the Ministry of Finance has outlined a new fast track that would not require ruling. In addition, exits in which the cash payment is under 40 percent will be completely exempt from tax.

To resolve conflicts between the regulations of the U.S. Securities Exchange Commission (SEC) and Israeli regulations, the Ministry has revised the Israel’s Companies Law. Dual-listed companies will also be allowed to report in English, and cost reductions are being offered as well.

Wix president Nir Zohar welcomed the reforms. “The very fact that high-tech companies are now being defined with a simple tax track created is…an important and healthy change for the future.”

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 complimented by the Wall Street Journal.”