Government incentives
January 2015
Firm's clients,
Re: Summary of Government incentives
In recent years, the Israeli Ministry of
Economy has expanded the financial support
package that is offered to certain companies
as part of various national programs defined
by the Ministry. Moreover, in January 2011,
a significant reform was introduced to the
Law for the Encouragement of Capital
Investments, 1959 ("the Law") which
materially changes the financial support
and assistance opportunities prescribed
under the Law. In view of the large variety
of encouragement programs featured in the
Law and in the Law for the Encouragement
of Industrial Research and Development,
1984 ("the R&D Law"), this circular provides
a condensed presentation of the various
government support programs as discussed
above.
Incentives practice,
EY Israel
Key government support tracks
1
Tax benefits
1.1 Beneficiary enterprise
� Tourism enterprise
� Base turnover reduction
1.2 Preferred enterprise
� Industrial enterprises
� Companies that perform R&D for a foreign resident
1.3 Additional tax benefits
� Residential rental buildings
� Approval regarding section 20a to the Income Tax Ordinance
� Approval regarding section 104 to the Income Tax Ordinance
� The Angels Law
� Amoritization of share purchase expenses
Support and grant programs
2
2.1 Industrial enterprises
� Grants to exporting industrial enterprises
� Grants for the establishment of industrial buildings
2.2Tourism
� Establishment/expansion/renovation/conversion of hotels
� Tourist attractions
2.3 R&D related grants and financial aid
2.3.1Generic R&D grants
� The generic program
� The MAGNET program
� MAGNETON
2.3.2Competitive R&D financial aid
� The competitive program
� The traditional program
� Tnufa fund
� Pre-seed and seed companies
� Technological incubators
� KIDMA - cyber security R&D program
� Space program
� Meimad - Dual R&D program
2.3.3 Assisted funding of joint R&D with a foreign company
� bi-national collaborations
� EUREKA
2.3.4Assisted funding of R&D by bi-national funds
� BIRD
� CIIRDF
� KORIL RDF
� SIIRD
2.3.5EU R&D grants
2.3.6Additional OCS grants
� Jerusalem Development Authority
2.4 Employment tracks
� Employment track
� Employment track for populations with low employment rates
� High income track
� Cyber track
� Ogen track
� Integrating interns from minority sectors in high-tech industries
� Increasing employment rates in Noam Ind. Park
� On-the-job training
2.5 Grants and financial aid for energy efficiency
� Ministry of Energy and Water programs
� Pilot projects
� Heznek Fund
� Installation of energy efficiency technology
� Grants for connecting to the natural gas distribution grid
2.6 Support tracks for exporters and international projects
� Setting up a marketing representation in India or China
� "Smart Money" program
� The fund for supporting international projects and tenders
3Loans
� Encouragement of investments in VC backed companies in the alternative oil sector
� Government secured loans
1
Tax benefits
Beneficiary enterprise
Preferred enterprise
� Tourism enterprise - a tourist facility in which at
least 25% of the accommodation arrangements are
made for foreign residents is entitled to grants (see
below) and tax benefits detailed above on income from
the provision of accommodation services, subject to
completing the establishment or expansion of the hotel
and to making a minimum qualifying investment within
a period of three years ending in the year of election.
The tax benefits will be granted for the increase in the
turnover arising from this program in relation to the
base turnover.
Competitive industrial enterprises which have been
established starting from January 1, 2011 and existing
industrial enterprise which chose to have the provisions
of Amendment No. 68 to the Law1, will be entitled to
preferred corporate tax rates as follows2:
� Reduction of base turnover - an approved enterprise
(prior to Amendment No. 60) and a beneficiary
enterprise are entitled to reduce their base turnover
by 10% in each tax year starting from the record year
provided that they meet certain cumulative conditions
regarding the rate of R&D expenses, the percentage of
employees with academic qualifications in engineering,
computers, life sciences or exact sciences and products
replacement or investments in productive assets. The
benefit is contingent on demonstrating the enterprise's
compliance with the base turnover reduction criteria
pursuant to Regulation 1 to the Regulations for
Encouragement of Capital Investments (Reduction
of Base Turnover) ("Regulation 1"). Among others,
Regulation 1 states that the total R&D expenses incurred
by an enterprise in a tax year in respect of which the
OCS approval was obtained or in the preceding year, will
not be lower than 7% of the turnover in the tax year and
the preceding year.
Year
Development
Rest of the
Area Acountry
2011-2012
10%15%
20137%12.5%
2014 onwards 9%
16%
Moreover, a preferred enterprise will be entitled to
investment grants (see below), accelerated depreciation
and reduced tax rates on dividend distribution from the
preferred enterprise's earnings as follows:
� Between Israeli companies - withholding tax exemption.
� A foreign company or individual - withholding tax at a
rate of 20%, subject to the relevant treaty for the avoidance
of double taxation.
� Tax exempt earnings from previous programs - will be
subject to the Law's transition provisions.
� Recognizing the company as performing R&D
services for a foreign resident - an enterprise
which performs R&D services for a foreign resident
will be able to enjoy the tax benefits described
aforementioned. The qualification is subject to an
OCS approval and to compliance with other conditions
prescribed in the Law.
1 Subject to compliance with the Law's requirements, including providing notice in a
timely manner and completing forms.
2 The tax rate for a special preferred industrial enterprise will be 5% in Development
Area A and 8% in the rest of the country.
7
Additional tax benefits
� Residential rental buildings - an individual or
a company which constructs a building or part of a
building with at least six residential apartments and
in which at least half of the area is designated for
residential rent, which is rented for a period of at least
five years out of the seven first years following the
termination of construction, will be entitled to the
following benefits: (1) accelerated depreciation at a
rate of 20% per annum; (2) tax on taxable income or
real betterment from sale or rent at a rate of 11% for a
company and 20% for an individual 3.
� Amortization of share purchase expenses - The
Law of Economic Policy for 2011 and 2012 offers
a benefit for a company that purchases shares of a
qualifying company whereby the purchase amount will
be deductible for a period of five years starting from
the year following the year of purchase. The aforesaid
Law prescribes the conditions and limitations for
qualifying for such a benefit.
� Approval for the purpose of section 20a to the
Income Tax Ordinance - Section 20a to the Income
Tax Ordinance allows deducting a company's R&D
expenses incurred for the purpose of promoting and
developing the company for tax purposes. According to
this section, under the conditions prescribed therein,
expenses incurred in scientific research in industry,
agriculture, transportation or energy approved by the
OCS will be deductible on a current basis in the tax
year in which they are paid. As for expenses incurred
in scientific research that is not approved by the OCS,
they will be deductible in three annual installments
starting from the tax year in which they are paid.
� Approval for the purpose of section 104 to the
Income Tax Ordinance - Section 104 to the Income
Tax Ordinance provides reliefs in the transfer of control
in R&D intensive companies in return for the raising
capital for R&D activity.
� The Angels Law - in order to make it easier for seed
stage companies to raise capital, an incentive is offered
to investors by deducting of the investment amount (up
to NIS 5 million) out of their taxable income produced
from any source for a period of up to three years.
Section 20a to the Law of Economic Policy for 2011
and 2012 (Legislative Amendments), 2011 ("the
Angels Law") and Income Tax Circular 12/2011 allow
certain target companies to recognize their investments
in shares performed by individuals as an expense 4.
3 Subject to a rental fee ceiling of NIS 6,200 a month.
4 Subject to OCS approval and to filing the appropriate forms in the company's and
the investor's tax returns.
9
2
Grant and
support
programs
Grants to exporting industrial enterprises
Industrial enterprises located in Development Area A
may apply to the Investment Center for receiving grant 5
in respect of investments in fixed assets (equipment,
buildings, furniture etc.) for the establishment or
expansion of their enterprise over a period of five years.
The grant is at a rate of 20% 6 of the approved investment
provided that at least 25% of the sales turnover
increasment from the enterprise arises from sales to a
market that consists of more than 14 million residents
(namely - export). The investment program comprises
additional conditions and obligations such as hiring
employees, issuing capital, achieving an increase in sales
turnover etc.
Grants for the establishment of industrial
buildings
A company that establishes an industrial building in
Development Area A in which at least 50% of its area
is leased to approved/beneficiary enterprises and the
remaining area is designed to industrial crafts may apply to
the Investment Center for grants at a rate of 20% 7.
Grants to tourism enterprises
� Establishment, expansion, renovation or conversion
of hotels - a hotel located in Development Area A on the
tourism map will be eligible for a grant at a rate of 20% 8
of its investments in construction and accommodation
equipment for the purpose of the enterprise's
establishment or expansion provided that 25% of all
accommodations at this hotel are by foreign residents.
Applications will be reviewed subject to the Ministry of
Tourism's procedures regarding application dates, budgets
and ranking as they will be published from time to time.
� Grants to tourist attractions - the Ministry of Tourism
encourages the establishment of tourist attractions
through a procedure which offers financial aid for setting
up tourist attractions with preference to popular tourist
areas, subject to the Law. The rate of the grant for fixed
assets in an approved project is 10%. Applications will be
reviewed subject to the Ministry of Tourism's procedures
regarding application budgets and ranking as they will be
published from time to time.
Grants for generic R&D
(subject to the R&D Law, non-royalty bearing)
� The Generic Program - large companies with annual
sales scopes in excess of US$ 100 million which
employ more than 200 R&D professionals in Israel (or
alternatively, with an R&D budget in Israel that exceeds
US$ 20 million) are eligible for grants for generic (precompetitive) R&D expenses of up to 20% of their annual
R&D budget.
� MAGNET instruments - development instruments that
consist of industrial companies, academic institutions and
potential users of the technology under development may
apply for a grant of 66% of the R&D budget in an industrial
company and of 80% of the R&D budget in a research
institution. The objective of these programs is to provide
pre-competitive generic development support when the
development timeframe ranges between three to five
years (in order to enable a long-term R&D process).
� MAGNETON - a program that promotes technology
transfer from academic research institute to industry
with the objective of technological commercialization.
The program offers support for pre-competitive, generic
stages of development. The maximum budget per
program is NIS 3.4 million and the grant is at a rate of
up to 66% of the approved budget. The timeframe in
the MAGNETON program is a maximum of 24 months.
Applications for the program may be submitted twice a
year, usually on April 15 and October 15 of each year.
� Nitzan Fund - for encouragement of Technological
collaboration between the research institutes and Israeli
companies in the fields of Agriculture. The objective
of Nitzan fund is to elaborate the applied research, in
the different Agriculture fields, which haven't been
acknowledge by the industry as having commercial
potential. Basic researches or preliminary researches are
not suitable for this program as they are in very early
stage and can't integrate immediately on commercials
channels. The Technology or the developed knowledge
has to be innovative and to lead to IP formation and very
attractive to the business sector.
5
6
7
8
Subject to the Investment Center's approval.
Addition of up to 8% to enterprises in the Negev.
Subject to the Investment Center's approval and to issuing capital.
An additional grant of 8% will be offered in Jerusalem, according to the relevant
temporary provision.
11
The support is granted subject to collaboration between
research institutes and industrial corporation who is
willing to pay 10% of the research costs, which will
be approved by the Chief Scientist of the Ministry Of
Agriculture. This program offers budget approval for a
maximum of 18 month and a grant of up to 90% of the
approved budget.
� Noffar - Noffar program is designed to support
applied academic research in varied themes/topics in
order to approve the feasibility of a technology in the
academia.
The objective of this program is to reach to significant
milestones at the end of the project, which will enable
to elements in the industry to sign a contract with the
Academy for the commercialization of the Technology.
Grants under this program constitute up to 90% of the
budget approved by the OCS (up to $140,000). There are
no royalty payments under this program.
Competitive R&D financial aid (subject to the
R&D Law, royalty-bearing after commercialization)
� The Competitive Program - supports companies at the
competitive stage of development. The grants are
not limited in amount but companies whose annual
development program budget exceeds NIS 10 million are
required to submit their application for financial aid at the
beginning of the calendar year. Programs are measured
according to several criteria, the principal of which being
the level of technological innovation, business potential
and the applicant's capability. The duration of an approved
development program is generally up to one year and the
scope of support ranges between 20% and 50% of the
approved development budget.
� The Traditional Industry Program - designed for companies
in the traditional industries such as plastic, rubber, metal,
glass, ceramics, hardware, textile, wood, leather, paper,
metalwork and food which are interested in upgrading their
coping capacity in the local and global markets by conducting
innovative R&D. These companies are eligible for funded
expenses that are not approved under the competitive
program and are defined by the nature of their industry
(such as deduction of manufacturing expenses and not only
development expenses). Companies that are considered as
early-stage traditional industry companies may benefit from
a grant of 50% of the approved budget.
12
� TNUFA Fund - a fund for pre-seed entrepreneurs and
startups that wish to bring a novel technological idea
to business fruition. The support is granted subject to
producing proof of technological feasibility and business
viability of the idea in question in an aim to promote the
project to a stage in which significant funds may be raised
for the continued development and commercialization.
The support granted at the lower rate of up to 85% of the
budget or NIS 200 thousand.
� Pre-seed Companies Program - pre-seed companies that
have yet received any OCS support (other than in the
technological incubator programs or the TNUFA Fund) and
that have raised relatively small amounts of capital from
private investors are eligible for support at a rate of 50% of
the approved budget. Among others, this program enables
obtaining the OCS' contingent approval for the development
program before the supplementary capital needed for
conducting the project is raised. This program offers budget
approval for a maximum period of 24 months.
� Technological Incubators - the technological incubator
program offers a support framework for early-stage R&D
that allows turning innovative technological ideas into
startups that will develop the technology until private
equity can be raised. The incubator operators are selected
through competition which evaluates, among others, the
nature and experience of the operator's team, the quality
of the business plan and the available financial resources.
� KIDMA - an aid program designed for cyber-security
companies which offers preferred competitive terms that
include a grant of up to 50% of the approved budget and
participation in marketing expenses. Budget approval may
be obtained for this program for a maximum period of 24
months.
� The Space Program - a program designed to encourage
R&D for finding various space related technological
solutions such as business space R&D and development
or upgrading of space related products. This development
program cannot exceed a period of 36 months with
maximum financial aid offered in an amount of NIS 20
million (50% of the approved budget for large companies
and 60% or 85% for small companies).
� MEIMAD - a support program aimed at encouraging
the development of dual use technologies that can benefit
the State's national security and at the same time form a
basis for potential global civilian and military marketing.
The maximum per project is NIS 5 million and the grant
rate is 50%-66% for industrial companies and 50%-90%
for research institutions. The program is operated in the
framework of the MAGNET instruments and the OCS in
collaboration with the Ministry of Defense's Administration
for the Development of Weapons and Technological
Infrastructure. Programs that consist of the transfer of
technology from research institutions to Israeli companies
are exempt from paying any royalties.
Bi-National collaboration agreements
(royalty-bearing commercialized products)
� Bi-national collaborations - programs that finance
Israeli companies that collaborate with foreign companies
in joint R&D projects. Financing is at a maximum rate of
50% of the budget approved by the OCS and is repaid
through royalties. The programs apply to countries that
have signed R&D bi-national collaboration agreements
with Israel and Europe - Denmark, Finland, France,
Germany, Italy, Slovenia, Spain, Sweden, the Czech
Republic, Switzerland, Greece and Turkey; Australia and
the Far East - China, India, Taiwan, Victoria (Australia);
n North America - Maryland, Virginia (USA); n South
America - Brazil and Argentina.
� EUREKA - a pan-European network of market-oriented
industrial research. The projects sponsored by the
network enjoy access to national financial resources.
Israeli companies that take part in this program are
entitled to receive royalty-bearing R&D grants from the
OCS, constituting up to 50% of the OCS' approved budget.
EUREKA has over 40 members and includes several subprograms as follows:
Specific R&D projects that support collaborations between members from different countries;
� EUREKA Clusters which support a group of companies in
specific predefined technological areas;
� Eurostars which support collaborations between small and
medium-sized entities;
� EUREKA Umbrellas which focus on specific technological
areas and the business sector.
�
Bi-National joint R&D support funds Israeli and foreign companies
Four bi-national funds that are not subject to the R&D Law
(but are royalty-bearing in commercialization stages of the
technology) provide an opportunity for receiving financial
support for R&D activities of Israeli companies that carry
out joint R&D projects with foreign companies as follows:
� BIRD (US-Israel Bi-National Research and Development) Foundation - the Foundation encourages
collaborations between the US private sector and
industrial companies in Israel by offering support in
the form of the lower of up to 50% of the product's
development and commercialization costs or US$ 1
million. In addition, BIRD Energy provides support in
financing the expenses of joint Israel-US renewable energy
development projects sponsored by the US DOE, the
Israeli Ministry of National Infrastructures and the BIRD
Foundation.
� CIIRDF (Canada-Israel Industrial R&D Foundation) the Foundation aims to promote and sponsor R&D
collaborations between these two countries. This support
consists of a grant of up to 50% of R&D costs up to a
total of C$ 800,000. The grant bears royalties that are
contingent on product commercialization.
� KORIL (Korea-Israel Industrial R&D Foundation) the Foundation encourages R&D collaborations between
Israeli and South Korean corporations. Financial aid for
joint R&D projects is provided through three categories:
technological feasibility studies, full scale projects and mini
scale projects. Full scale projects are sponsored at a rate
of up to 50% of joint R&D expenses up to a ceiling of US$
1 million. The grant bears royalties that are contingent on
product commercialization.
� SIIRD (Singapore-Israel Industrial R&D Foundation) tthe Foundation aims to promote and support joint
industrial R&D ventures between Singapore and
Israeli companies by financing up to 50% of the joint
venture's approved costs up to a ceiling of US$ 1 million
(and not more than US$ 500,000 in one year). The
grant bears royalties that are contingent on product
commercialization.
13
EU Framework R&D programs
Additional OCS grants
(not subject to the R&D Law and non-royaltybearing)
� The Jerusalem Development Authority - the Authority
encourages the establishment of high-tech and bio-med
ventures in Jerusalem, entitling startup companies
that have 3-20 employees to grants based on the OCS'
recommendation.
The EU is currently in the process of completing the new
EU Framework Program for Research and Innovation
known as Horizon 2020. This program is expected to
supersede the EU Framework Program 7 which will be
coming to an end in the next few months by consolidating
the three main R&D initiatives and financing resources: (1)
the Framework Program; (2) the CIP (Competitiveness
and Innovation Framework Program); and (3) the EIT
(European Institute of Innovation and Technology).
The objective of Horizon 2020 is to enhance the EU's
positioning in the various science fields, promote issues
that are of global concern such as climate change,
sustainable transport and mobility, development of
cheaper renewable energy, food security, social and
political security and the challenges of aging populations,
enhance leading industries in terms of innovation and
ley technologies and support small and medium-sized
companies. This program also emphasizes the support of
international and multidisciplinary collaborations which will
be expressed in diverse activities such as:
� Proposing methods for dealing with and bridging gaps between research and market towards application and commercialization
� Encouraging market-driven technologies
� Supporting R&D or innovation projects of small and
medium - sized companies, including specific milestone
financing, while contributing to social challenges and to the
development and foundation of competitive key technologies
� Supporting innovation ventures by startups, spinoffs and
young companies
� Encouraging small and medium-sized companies to lead projects
or play a crucial role in technological innovative development
14
Employment tracks
� Employment track - for companies that are planning
to establish, expand or relocate an enterprise in or to
support areas (such as national preference areas, Sderot,
Gaza envelope settlements and the Jerusalem district)
and recruit at least five new employees for that purpose
with an average monthly salary of NIS 6,160 (linked to
the increase in the minimum wage) for a period of at least
30 months. A business that is located in the city of Sderot
is eligible for alternative support for recruiting two new
employees but in such case, no support will be provided
for recruiting more than four employees. The average
support ranges from 8% to 15% of the salary cost to the
employer (up to a maximum salary of NIS 15,000 per
employee) for a period of 2.5 years based on the size of
the enterprise and the date of recruitment. Employees
that entitle the company to such grant must live in the
national preference areas.
� Employment track for populations with low
employment rates - for companies that are planning
to establish, expand or relocate an enterprise in any area
in Israel, provided that at least 90% of the additional
employees in the program are from populations with
low employment rates (including disabled people, single
parents, orthodox Jews and Israeli Arabs, Druze, Bedouins
and Circassians). For that purpose, a company is required
to hire at least five new employees at a minimum wage.
The average support ranges from 20% to 25% of the
salary cost to the employer (up to a maximum salary
of NIS 15,000 per employee) based on the enterprise's
location, the type of population employed at the
enterprise and the date of recruitment. As mentioned
above, this program addresses employees living in all
areas of Israel.
� High income track - a track designed for enterprises
with a consolidated income turnover (including a foreign
parent company) in excess of NIS 100 million which are
located in national preference areas and are planning to
recruit at least 15 new employees with a salary cost of
at least 2.5 times the average salary in the market. The
average grant is 25% of the salary cost to the employer
(up to a maximum monthly salary of NIS 30,000 per
employee) for a period of four years. The track is
contingent on at least 60% of the new employees residing
in national preference areas.
� Cyber track - a track designed for enterprises with
a consolidated income turnover (including a foreign parent
company) in excess of NIS 100 million which are involved
in development of products and/or services in cyberspace,
in the following designated areas: Beer-Sheva, Ofakim,
Dimona, Netivot, Arad, Yerucham and Mehavim regional
council. The enterprises are requried to recruit at least 15
new employees with a salary cost of at least 2.5 times the
average salary in the market. The average grant is 33.75%
of the salary cost to the employer (up to a maximum
monthly salary of NIS 30,000 per employee) for a period
of four years. The track is contingent on at least 60% of
the new employees residing in national preference areas.
� Ogen track - a track designed for enterprises with
a consolidated income turnover (including a foreign parent
company) in excess of NIS 100 million which are located
in national preference areas and are planning to recruit
at least 100 new employees with a salary of at least 1.5
times the average salary in the market (the employer's
cost). The average grant ranges from 20% to 27.5%
of the salary cost to the employer (up to a maximum
monthly salary of NIS 20,000 per employee) for a period
of four years based on the number of newly recruited
employees in the context of the program and the year of
employment. The track is contingent on at least 60% of
the new employees residing in national preference areas.
� Program for increasing employment rates in Noam
Ind. Park - a program designed for enterprises that are
relocated from the center of Israel to the Noam Ind. Park
and for new enterprises that will be constructed in the
Noam Ind. Park according to the following tracks:
Enterprise relocation - a grant of up to NIS 2.5 million for
the relocation of an existing enterprise and payment of the land price to the Israel Lands Administration.
� Enterprise construction - a grant of NIS 117,000 for each
thousand sq. m approved in the program and participation
in 50% of the planning and construction costs.
� Both tracks are eligible for participation in expenses
relating to employee transportation, municipal fees and
employee training.
�
� On-the-job training for Israeli employees in the
industrial and service sectors - a track designed for
enterprises that hire new unprofessional Israeli employees
(or employees with training in different fields) and provide
them with on the-job training in various segments such
as printing, photography and production, administration,
nursing, water and energy, rescue, metals and machinery,
automobiles, accommodation, electricity and electronics,
fashion and textiles, wood and furniture and jewelry
(support may be provided in other segments subject to
obtaining special approval). The support consists of a
grant of up to NIS 2,000 per trainee and up to NIS 1,000
per trainer for a period of 3-6 months. The track is limited
to five training groups in a specific segment (with 3-10
trainees per group and possible individual training) in the
same corporation.
� Track for integrating interns from minority sectors
in high-tech industries - a track designed for high-tech
industries that hire interns from minority sectors for
a gross hourly rate of NIS 30 and provided that these
interns are employed for a period of at least 12 months (a
maximum of 24 months). The support rate is up to 40% of
the salary cost to the employer (up to a gross maximum
monthly salary of NIS 13,000 per employee).
15
Support tracks in the energy and energy
efficiency sector
� Programs by the Ministry of Energy and Water the Chief Scientist of the Ministry of Energy and Water
is in charge of R&D support programs while retaining
a critical mass of knowhow and activities in Israel,
developing and retaining Israeli knowhow and conducting
techno-economic studies.
The Ministry of Energy and Water's support tracks are as follows:
�
Financing and supervising R&D in energy related areas
(academia and industry) and promoting international
technological collaborations in the following segments:
� E► nterprise projects
� E► nergy efficiency
� S► mart networks
� O
► il alternatives
� T► reatment of waste and sewage
� Specific technological projects
� R
► enewable energy (solar, wind, biomass)
� Energy industry supporting studies
� Annual programs
(the program's terms must be confirmed annually):
� Pilot projects - support of projects for areas testing
and examining innovative technological components
before commercial application, with/without reference to
their interface with other necessary components. At the
conclusion of the project, no scale-up will be needed of
more than two orders of magnitude until the commercial
stage. Preference will be given to international collaboration
projects with real benefits of project promotion and/
or program commercialization. Projects for reducing oil
dependency in the transportation and energy sectors will
be supported. A grant of 50% of the approved budget up to
NIS 1.5 million will be provided.
� Heznek Fund - a program for proof of technological
feasibility or business viability of an idea for the
development and manufacture of a new product or
the development of a new process, or for significant
improvement of an existing product or process, provided
that the product or process are in the fields of alternative
energy, renewable energy, oil alternatives or energy
efficiency. The ideas must contain components of
technological development, be solidly formed and have firm
scientific foundations. The Ministry offers support at a rate
of 62.5% of the approved budget up to NIS 625,000.
16
� Projects for installing energy efficiency technologies
participation in costs of installing energy efficiency
technologies. Grants will be provided to energy
consumers (industrial, public, commercial) which
will install technologies that are included in the list of
approved technologies (including water cooling units,
air compressors, residual heat utilization systems and
lighting fixture upgrades) and will be able to demonstrate
compliance with specific saving targets. The grant amount
is up to NIS 300,000 per project.
� Academic research fund - for researchers that pitch
projects in the various areas that are published by the
Ministry every year with applied outlook (in the present or
future). Up to 100% financing may be obtained for a period
of three years in an indefinite amount.
� Support in financing costs of connection to the natural gas distribution grid and in financing costs of conversion
of internal systems to natural gas operation - support
is offered to gas consumers that connect to the natural
gas distribution grid in specific areas and are defined
as medium/large consumers (whose expected annual
natural gas consumption exceeds 100,000 cm a year
and are defined as medium/large consumers in the
natural gas distribution agreements they signed with the
license owners). The grant rate ranges from 50% to 75%
of deductible expenses up to a maximum amount of NIS
700,000.
Support tracks for exporters and
international projects
� Support in setting up a marketing representation
in China or India - this program is designed for Israeli
corporations with sales turnovers of NIS 15-200 million
which are planning to set up a marketing representation
in China or India. The program offers a grant of 50% of
the costs of stationing a company employee in the target
market, hiring a local advisor, operating an office and
setting up a beta site for proof of local application of the
technology/product in the target market. The support
will be repaid through royalties from sales in the target
market.
� "Smart Money" program - the program is designed for
corporations that operate in different sectors
(including professional services, software and industrial
subcontractors), export more than 250,000 USD per
year and are interested in increasing their total export or
in beginning to export to foreign markets by investing in
promoting marketing in target markets. The grant rate
is 50% of approved expenses (including data collection,
advertising, conventions and exhibits, business travels,
regulation and insurance) up to an amount of NIS 0.5
million 9.
� The Fund for Supporting International Projects and
Tenders - the Fund offers support for Israeli
companies 10 which participate in international
projects and/or tenders in the context of which
the corporations provide services and/or products
overseas. The support is at a rate of 50% 11 of the
expenses, up to NIS 100 - NIS 400 thousand for
preparing a tender proposal and NIS 800 thousand
for a feasibility study. The prerequisite for submitting
an application is a project value of at least US$ 500
thousand for preparing a tender proposal and at
least US$ 2 million for a feasibility study. The project
must also have added value of at least 35% in Israel.
The grant will only be repaid if the company wins the
tender/project.
9
According to the Program's terms, an exporter will pay royalties at a rate of 3% on sales in the target market over a period of five years but not more than the total
linked amount of the grant received.
10 With a sales turnover of up to NIS 400 Million.
11 60 % for companies located in the south of Israel and in GAZA envelope settelments
17
3
Loans
� Program for encouraging investments in VC backed
companies in the oil alternative sector - a program
for encouraging investments in venture capital
backed companies in the sector of oil alternatives for
transportation purposes. The objective of the program is
to provide government support for the risk embedded in
financing R&D of innovative oil alternative technologies
for transportation. The program is designed for both
local and foreign investors and for Israeli tech companies
operating in this sector. Support will be provided in the
format of a loan granted to the company simultaneously
with a private investor's cash capital investment in the
company. Government support will be at a rate of 50%
of the amount of the private investor's investment in
the company. The companies will receive financial aid
in the form of a loan covering 50% of the total private
investment amount and the investors will receive a
warrant from the company that entitles them to receive
additional shares in the company under the original
investment terms in return for the repayment of the entire
loan amount to the OCS instead of to the company.
� Government secured loans - the Fund for Supporting
Small and Medium-Sized Businesses grants government
secured loans to Israeli corporations with a sales turnover
of up to NIS 100 million under several tracks: investments,
working capital, business under construction and the
small business fast track 12. The loans are granted by the
banks assigned by the Fund and are contingent on the
provision of a personal guarantee by the corporation's
shareholders that hold more than 5% in the corporation.
The amount of the loans that are offered by the Fund are
as follows:
�
New businesses or businesses with a maximum sales turnover of NIS 6.25 million - NIS 500,000.
Businesses with a sales turnover in excess of NIS 6.25 million - up to 8% of the business' overall turnover.
�
Businesses on the fast track - up to NIS 100,000
�
EY's Government Incentives Practice
focuses, in a professional and exclusive
manner, on the issue of government
incentives in Israel. The practice
operates with a broad perspective
of the client's needs according to
a business plan and in compliance
with the local and international tax
laws applicable to the client and the
nature of the client's development,
manufacturing and marketing activities
in Israel and abroad.
The Government Incentives Practice
will be glad to assist you maximize
the prospective government support
opportunities and handle all program
applications through the stage of
actual receipt of financial assistance.
Our professionalism is expressed by our
ability to remain constantly informed
of all program manifestos/budgets/
updates that are made public and in
our understanding of and familiarity
with the various programs which allows
us to assess the chances of success
of the process and ways of improving
these chances. We are able to provide
clients tailored one-stop-shop solutions
that optimize the potential integration
of the different incentive programs..
12 A sales turnover that does not exceed NIS 3 million.
19
The contents of this circular represent a condensed
summary of the details of the various programs as they
are to date. We shall be happy to be at your disposal for
providing detailed information. Please contact:
Sigal Griba | 03-6278250 | [email protected]
Itay Zetelny (Global Incentives) | 03-6276181 | [email protected]
Gal Ginat (Global Incentives, Haifa) | 04-8654089 | [email protected]
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust and
confidence in the capital markets and in economies the world over. We
develop outstanding leaders who team to deliver on our promises to all
of our stakeholders. In so doing, we play a critical role in building a better
working world for our people, for our clients and for our communities.
EY refers to the global organization and/or one or more of the member
firms of Ernst & Young Global Limited, each of which is a separate legal
entity. Ernst & Young Global Limited, a UK company limited by guarantee,
does not provide services to clients. For more information about our
organization, please visit ey.com.
© 2014 Kost Forer Gabbay & Kasierer
All Rights Reserved.
ED None
This publication contains information in summary form and is therefore intended for
general guidance only. It is not intended to be a substitute for detailed research or
the exercise of professional judgment. Neither EYGM Limited nor any other member
of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in
this publication. On any specific matter, reference should be made to the appropriate
advisor.