beps- israel innovation box
Post on 15-Apr-2017
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ISRAEL’SINNOVATIONBOX AN UNPRECEDENTED OPPORTUNITY
FOR MULTINATIONAL COMPANIES
ISRAEL’SINNOVATIONBOX AN UNPRECEDENTED OPPORTUNITY
FOR MULTINATIONAL COMPANIES
Israel’s diverse open market economy has a proven record of resilience and sustained competitiveness in the face of global economic crisis. Israel’s anchored banking system, elastic labor market and seasoned policy makers are well positioned to protect investors’ interests throughout turbulent global market conditions.** Israel is ranked 6th in Strength of Investor Protection by The World Bank
Israel’s economy is one of the strongest in the world, boasting positive and steady growth for over a decade.
-5.25
-1.75
-3.5
-0.0
1.75
3.5
5.25
7.0
2013 20142007 2008 2009 2010 2011 2012
Israel European Union United Kingdom United States
GDP GROWTH RATE (%)
Source: The World Bank
SECURE IN ISRAEL
Positive Growth Rate— Resilience toExternal Shocks
Only in Israel
HIGHESTConcentration of
Engineers in the World
Source: Global Creativity Index 2010 0
20
40
60
80
100
120
140
ISRAEL UNITED STATES
ENGINEERS PER 10,000 PEOPLE
4 | ISRAEL INNOVATION BOX
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Noted in Israel
12Nobel Prize Winners
Israeli ScientificInstitutions are
Ranked Topin the Worldfor Quality.
Noted in Israel
No.3In the World –
Scientific Infrastructure
Source: IMD 2015
Written in Israel
No.4In the World – Science
& Technical Journal Articles
Source: The Global Talent Competitiveness Index,
2014Canada 22,132
Sweden
Australia
Israel
Finland
Switzerland
New Zealand
Denmark
24,831
22,375
25,722
25,088
28,335
27,454
29,239
NUMBER OF SCIENTIFIC AND TECHNICALJOURNAL ARTICLES PER MILLIONPPP$ GDP / 2011
6 | ISRAEL INNOVATION BOX
Invest in Israel
No.2In the World –
R&D Investmentas % of GDP
Source: OECD
R&D INVESTMENT AS % OF GDP
USA
OECD
2.74%
2.38%
Austria
Denmark
Finland
Sweden
Israel
Japan
Korea
3.10%
3.05%
3.17%
3.16%
4.11%
3.59%
4.29%
Origin In Israel
50%Of Global
Low-Pressure IrrigationSystems
Created In Israel
DISK ON KEY
Mobile Storage
Invented In Israel
PILL CAMFirst Ingestible
Endoscopy Camera
Powered In Israel
MILLIONSOf Cardiovascular
Stents
FabricatedIn Israel
THE BESTThe World’s Top
Digital3D Print
Technology
DevelopedIn Israel
WAZENavigation
System
ConceivedIn Israel
1000+Innovative StartupsPer Year
ImaginedIn Israel
KINECTGesture
RecognitionSystem
ManufacturedIn Israel
BILLIONSOf Intel
ComputerProcessors
A central issue within the OECD BEPS recommendations is the issue of IP registration location. The essence of guidelines on this issue is that intercompany remuneration of the IP owner should be in line with the locations of its actual functions, assets and risk profile. It is widely agreed that multinationals are currently evaluating their global operations in a post-BEPS world, seeking to align ownership and control over intangibles with value-creating functions. Since Israel is home for many of the value-creation activities of global companies, the combination of the new Innovation box with the already thriving innovation ecosystem creates a strong value proposition for multinationals – both for those who already have a presence in Israel and those considering it. The Israeli government strongly believes that the BEPS recommendations are an opportunity for multinationals operating in Israel, and is determined to take the necessary steps to facilitate this opportunity. Israel is launching a new IP tax regime, as part of the upcoming state budget.
WHAT IS BEPS?
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INNOVATION BOX PROPOSALIP INCENTIVES
* The Innovation Box would be in addition to already existing tax incentives presented on the following page
CORPORATE INCOME TAX
6% / 12%OVER/UNDER$2.5B GLOBAL
TURNOVER
4%DWHT ON
DISTRIBUTION TO A FOREIGN COMPANY
DIVIDENDSCAPITAL
GAINS/EXIT TAX(UPON SALE OF IP)
6% / 12%OVER/UNDER$2.5B GLOBAL
TURNOVER
8 | ISRAEL INNOVATION BOX
Competitive industrial enterprises that are listed in Israel are entitled to preferred corporate tax rates, as follows:
• Companies located in Development area A could be entitled to a 9% reduced corporate tax.
• Companies located in other areas can enjoy a 16% corporate tax.• In both areas, additional dividend tax reductions might also apply. • Companies defined as special preferred industrial enterprises are entitled to a
further reduction: a 5% corporate tax in Development Area A and 8% in the rest of the country. Following the Innovation Box Proposal, the minimum required annual revenue from local activity was reduced to NIS 1 billion and the minimum requirement for consolidated balance sheet revenue was reduced to NIS 10 billion. In addition, the dividend withholding tax rate on distribution to a foreign company was reduced to 5%.In addition to the tax incentives, Israel offers grants in various areas:
• Grants of 20% of the approved investment, covering investments in fixed assets (e.g. equipment, buildings, machinery etc.) and up to an additional 10% for enterprises located in Negev
• Employment grants – 20-30% of the salary cost for additional employees• R&D grants – 20-50% of total eligible R&D expenditure• Vocational training grants for OJT programs
* In some cases a company may be eligible for more than one grant program
EXISTING TAX INCENTIVES
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MUL
TIN
ATIO
NAL
CO
RPO
RATI
ON
S LO
CATE
D IN
ISRA
EL*
*The above is a partial list of approximately 270 Multi-National Corporations operating in Israel
The Foreign InvestmentsAnd IndustrialCooperation Authority
Direct contactziva.eger@economy.gov.il+972 2666 2405
investinisrael.gov.il
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