from the director general: procedure 02/2016: …...the hotel projects planned in the dead sea...

Ministry of Tourism

Tourism Investment Administration

Ministry of Tourism

Director General

7 Tamuz 5776

July 13, 2016

From the Director General:

Procedure 02/2016: Assistance for restoring and converting

structures for hotel use for 2016

In accordance with the Encouragement of Capital Investments Law, 5719-1959

In recent years, we have witnessed a constant increase in incoming tourism to Israel,

as reflected by the number of tourists and number of accommodations booked. Based

on the projections of the Ministry of Tourism, this trend is expected to continue and

even increase in coming years. One of the conditions for meeting the growing demand

and increase in tourism is to add 9,500 additional hotel rooms.

In order to resolve the expected shortage of hotel rooms in the upcoming years, the

Ministry of Tourism and the Tourism Investment Administration hereby announce a

facilitation track for restoring and converting structures for hotel use, while giving

priority to areas in high demand among tourists, in accordance with the

Encouragement of Capital Investments Law, 5719-1959 (hereinafter: the Law) in

order to address the expected shortage of available hotel rooms in the coming years.

This procedure has been formulated in order to define the assistance track that will

result in granting an "approved enterprise" status to hotel projects that meet the terms

dictated by law and the criteria defined by this procedure, and are found to be the

most suitable for this status.

The total Investment Administration budget for this procedure stands at

approximately 30 million NIS.

In accordance with government resolution number 1556 dated June 19 2016

administrative grants will be given in addition to the grant under the law in the scope

of 13% in two stages, as stated in Annex M to the procedure. The extent of the

administrative grants given will be up to 30 million NIS under this procedure.

The hotel projects planned in the Dead Sea region in the different tracks will be

budgeted separately for the plan between 2012 – 2016, up to 128 million NIS, in

accordance with government resolution no. 4254, dated April 8, 2012.

These days the Ministry is working to implement the government's resolution

regarding administrative grants for accommodation projects at a low-cost level on the

different tracks, which will be added to the grant prescribed by law. These grants will

be from the general investment budget to be activated through the Investment

Authority at the Ministry of Tourism.

Ministry of Tourism


An applicant for "approved enterprise" status submitted in accordance with this

procedure, should his application be approved, shall be eligible for a "statement of

approval" that entitles the applicant to grants as defined by law as well as

administrative grants, should he meet the terms of this procedure.

Amir Halevi

[Signature]

Director General

Ministry of Tourism


Procedures for assistance in restoring or

converting structures into hotels in Israel

2016

In accordance with the Encouragement of Capital

Investment Law, 5719-1959

Procedure #02/2016

Ministry of Tourism


Table of contents

Section Topic Page

1 General

2 Definitions

3 Procedure highlights

4 Submitting a request for "Approved Enterprise" status

5 Prerequisites

6 Documents to be included

7 Additional inspections before review by the administration

8 Consideration of requests

9 Grant allocations

10 Administrative procedure for receiving a statement of approval

11 Execution stages and grant payments

Appendix Topic Page

A Recognized investment ceiling per room for construction of new

hotels

B Initial application form for a tourism investment plan

C Criteria and priorities for budget allocation

D Approval of the applicant’s and signatory rights holder’s details

E Approval of the local committee engineer

F1 Undertaking to plan and build pursuant to Regulation 5821 for

Green Construction

F2 Sustainable tourism

G Performance guarantee

H1 Phrasing of the Letter of Undertaking

H2 Phrasing of the Letter of Undertaking

I The applicant’s representations

J Statement on not having received grants

K Undertaking not to sell hotel units at the hotel

L Undertaking regarding rating of hotel

M Administrative grant, low-cost hotels

Ministry of Tourism


1. General

1.1. Per the objectives of the Ministry of Tourism (hereinafter: the

Ministry), there is a need to increase the number of rooms available, so

as to meet the rising demand and to lower the prices of vacationing in

Israel.

1.2. The goal of this procedure is to encourage restoration of hotels to their

original function after not being used for this purpose for at least 24

months, and to encourage conversion of structures that have been

designated for other purposes into hotels, as defined in this procedure.

Priority will be given to popular tourism areas, in accordance with the

Encouragement of Capital Investments Law, 5719-1959 (hereinafter: the

Law), and subject to the areas defined in the Encouragement of Capital

Investments Ordinance, 5767-2007, and all of its amendments (or any

other ordinance that replaces this one) and within the framework of

the budget to be approved for this purpose.

1.3. Applicants who request "approved enterprise" status in accordance with

this procedure and meet all of the requirements dictated by law and the

criteria noted in this procedure, shall be eligible for a "statement of

approval" that entitles the applicant to grants as dictated by law.

1.4. As a rule, transfer of rights and obligations derived from this procedure

shall be prohibited, with the exception of special circumstances as noted

in a request to be submitted by the developer and approved in advance

by the Administration.

1.5. Notwithstanding the provisions in this procedure, the Investment

Administration may elect to not approve an application submitted by an

applicant or by a corporation owned or controlled by him, which

violated the provisions of the Planning and Building Law, by using a

hotel structure for other purposes contrary to the tourism designation of

the lot and the approved plans.

1.6. Once per quarter, the Investment Administration shall publish its

decisions and the status of requests that have been approved or rejected,

on the Ministry of Tourism website.

1.7. The Administration reserves the right to reject requests due to

inadequate budgets.

Ministry of Tourism


1.8. The Ministry reserves the right to cancel this procedure or change it at

any time, subject to available budgets or changes in the Ministry's

investment and development policies.

2. Definitions

The terms listed in this section shall be defined as follows for use in this

procedure and its appendices:

2.1. “Hostel” – a youth hostel or a backpackers' hostel – as defined in the

physical standards for planning and classification of touristic

accommodation facilities on its appendices.

2.2. Hotel or structure – a guest room hotel, suites hotel, motel, youth hostel

or vacation village, as defined under Physical Standards, with the

exception of a "special hotel accommodation" as defined in the Director

General's circular published in May 2009, including all updates.

2.3. “Zero Report” – the assessment of an engineer on behalf of the

Ministry of Tourism describing the state at the time of the submittal of

the application, for the determination of the investments made prior to

the submittal of the application.

2.4. “Final Execution Report” (FER) – a report the applicant submits to the

Ministry of Tourism after the completion of the project. The report

summarized and details all of the investments made in the project.

2.5. The Law or the Encouragement of Capital Investment Law refers to

the Encouragement of Capital Investment Law, 5719-1959.

2.6. Applicant and/or developer – applicant for "approved enterprise" status

in accordance with this procedure, which is one of the legal entities

defined in article 40b of the Law.

2.7. “The Professional Team” – a team appointed by the Development and

Infrastructure Administration VP, authorized to receive and examine

applications and their preparation for discussion at the Tourism

Investments Administration.

Ministry of Tourism


2.8. “Approved Investment in a Project” – the investment according to the

engineer’s assessment or the "total recognized investment ceiling" or

according to the scope of investment in the applicant’s request for the

plan, the lower of the options.

2.9. Business day – a day on which the majority of banks in Israel are open

for business. In any case in which a date noted in this procedure falls on

a non-business day, the date shall be postponed to the first business day

that follows.

2.10. Accommodation unit or hotel room – an accommodation unit in a

hotel that includes at least a bedroom, bathroom, and toilet, for tourist

accommodations and recreation purposes.

2.11. Statement of approval – a document that grants its recipient the right to

receive grants, subject to the recipients' compliance with the terms and

conditions of the grant and this procedure.

2.12. Structure for conservation – a structure that has been included in the

site conservation program, as described in article 76a of the Planning

and Construction Law, 5725-1965, and in its fourth amendment, and a

structure that appears in the conservation index of the local authority.

2.13. Investment Administration or Administration – Tourism Investment

Administration as defined in article 1a of the law.

2.14. Procedure – this procedure for allocation of capital investment

encouragement grants (restoration/conversion track)

2.15. Encouragement of Capital Investment Ordinance or the ordinance –

Encouragement of Capital Investment Ordinance (defining the

boundaries of special regions for tourism enterprise purposes), 5767-

20071, including all amendments or legislation that replaces it.

2.16. Approved plan for engineers – approval from the Ministry to adjust

construction permits approved by the local committee to suit the

architectural plans that have been approved by the Ministry. In cases in

which a building permit is not required, the architectural plans that were

approved will serve as the "approved plan for engineers".

1 See the full ordinance (in Hebrew) on the ministry website www.tourism.gov.il > touristic

development > map of tourism development regions.

../../Users/user/Dropbox/Alltext/www.tourism.gov.il

Ministry of Tourism


2.17. Activation period – the period of time during which the applicant is

required to operate the hotel, as noted in the statement of approval held

by the applicant.

2.18. Physical standards – the physical standards for planning and

classification of the tourism accommodation facilities used by the

Ministry, in accordance with the Director General's circular dated

December 20122, as well as in accordance with the Director General's

circular dated December 20123, or any later circular that replaces it and

is valid on the day on which the architectural plans are submitted to the

Ministry for approval.

2.19. Total recognized investment ceiling – shall be set to 60% of the

investment ceiling per room (as defined in Appendix A) and according

to the hotel level, multiplied by the number of approved rooms in the

architectural plan.

The Administration reserves the right to approve a new investment

ceiling, under the irregular circumstances in which the engineer

determines that the foundations, infrastructure or utility systems in the

existing structure are in poor condition and require large investments

that exceed 60% of the investment ceiling. The rate may be up to 80% of

the investment ceiling per room, and in the case of a structure for

conservation, an additional sum of up to 20% in relation to the total

recognized investment ceiling.

3. Procedure highlights

3.1. As part of this procedure, the Investment Administration will decide

on allocation of grants valued at 20%4 of the recognized investment in

the project.

3.2. The Administration may consider not approving the request for which

the scope of the grant exceeds 25% of the total budget under this

procedure. This decision will be at its discretion and for documented

justifications.

2 Physical standards: see ministry website: www.tourism.gov.il > touristic development > physical

standards for facility planning and classification. 3 Physical standards of backpackers’ hostels: see ministry website:

https://www.gov.il/he/Departments/ministry_of_tourism> Circulars CEO> CEO returns (supplement to

circular 12/2012) 4 Subject to the grant rates defined in the Encouragement of Capital Investment Law.

../../Users/user/Dropbox/Alltext/www.tourism.gov.il

Ministry of Tourism


3.3. The grant shall be provided for:

3.3.1. Restoration of a hotel or a wing at the hotel that has not served as

a hotel for at least 24 continuous months preceding the date of

submission of the request.

The applicant shall provide satisfactory external proof that the

hotel or wing was not used during the stated period of time, as

required by the Ministry.

For this purpose, a wing is defined as an area of at least 11 rooms

that can be separated from the rest of the hotel rooms.

3.3.2. When converting a structure that was not designated in the urban

construction plans (taba) as a hotel or was not actually used for

this purpose, the applicant shall present approval of non-

conforming use valid for at least 5 years, while at the same time

change its urban construction designation for hotel use.

“Structure” for this purpose, is a building or part of a building

with the capacity for 11 hotel rooms, service areas and public

spaces, per the defined physical standards.

3.4. Notwithstanding the provisions in this procedure, the Administration

may ease any of the conditions of the procedure or reject an

unreasonable request for documented justifications.

3.5. With the purpose of encouraging the construction of low-cost hotels, the

government resolved in resolution number 1556 dated June 19 2016 that

in addition to the grant under the Encouragement of Capital Investments

Law, 5719-1959 an addition of administrative grants will be given in the

scope of 13%, of a recognized investment in a project for a low-cost

tourism facility for a period of three years, starting on July 1 2016 up to

June 30 2019.

The examination of the requests and conditions for approval will be

pursuant to the provisions of Appendix M.

3.6. The grant rates shall apply to the recognized investment per project. In

any case, the recognized investment per project shall not exceed the total

recognized investment ceiling or the required investment estimation

defined by the engineer on behalf of the Ministry of Tourism, as

requested and as defined in section 7.2 below or according to the

developer’s request as specified in section 3.19 below, the lower of the

options.

Ministry of Tourism


3.7. A status of "approved enterprise" and grants per law shall be given to an

applicant for the purpose of establishment of a new structure that

includes at least 11 rooms, or to expand an existing structure by adding

at least 11 new rooms.

3.8. A special hotel occupancy facility will not be eligible for grants, except

for a facility where previously some of its units were sold under the

FREE HOLD method and under the following conditions:

a. The percentage of units sold up to the date of application does not

exceed 50% of the units in the hotel.

b. The units sold and areas serving only these units as well as the

relative share of public areas according to the units sold will not be

eligible for a grant.

c. The applicant will be required to sign an undertaking attached as

Appendix K, whereby no more units will be sold, both in the

existing facility and the facility to be constructed. This undertaking

will be included as part of a warning notice under regulation 27 of

the Land Regulations (Management and Registration), 5772 – 2011

3.9. Grants shall not be provided by this procedure for investments that have

been made for financial support or by a different government/public

grant via a different framework, or in the event the operation period has

not yet ended from the date of approval of the FER, according to the

letter of approval granted and in accordance with its terms. To ensure the

compliance with this condition the applicant shall sign the statement as

set out in Appendix I.

3.10. The grant shall be provided for investment in planning, infrastructure,

construction, and purchasing furniture and other equipment. The

recognized planning investment shall be up to 8% of the total recognized

investment.

3.11. The statement of approval shall include a condition which mandates its

recipient to operate the hotel for a continuous period of at least 15 years

after opening it (hereinafter: period of operation), at the level which

was approved during the application phase and as is considered

acceptable for hotels on similar levels and of similar size. In order to

ensure that this condition is met, the developer shall sign a liability form

for which a planning warning note shall be registered, as defined in

section 10.6.1b below.

In spite of the aforementioned, in case of conversion or restoration

of a level D hotel, a level C motel or a youth hostel, a minimal period

of operation of 10 years shall be required.

Ministry of Tourism


3.12. The final date for submitting requests per this procedure is August

15, 2016 at 14:00.

3.13. The deciding date for recognition of investments that are eligible for

grants shall be the day on which a request is submitted for "approved

enterprise" status, in accordance with this procedure and the requests

submitted after it has been published.

3.14. According to the above, a developer that submitted a request in

accordance with the Law, on a date earlier than that deadline for

submitting requests, and issued a request number but that has not

received a grant per this request, and would like to be included in the list

of those that will be considered as part of this procedure, shall submit a

new request as defined by the procedure for the specific project and note

the date on which the previous request was submitted.

Should a statement of approval be issued for this developer, the deciding

date for purposes of recognition of the investments made shall be the later

of either the date of the previous request submitted or 24 months before the

final date to submit requests per this procedure.

3.15. When submitting a request per this procedure, the applicant commits to

meeting all of the conditions of the statement of approval for declaration as

an "approved enterprise" if and when this status is granted.

3.16. The Administration reserves the right, in irregular cases that will be

explained and subject to conditions that it defines, to replace one

requirement with another, deciding one, and to instruct that the alternative

requirement to that stated in the original procedure be implemented in a

manner that achieves the same objective as that defined for the original

requirement.

3.17. When "approved enterprise" status is granted, the recipient of this status

shall receive conditional approval of the request per which the applicant

shall be required, within 60 days of the date on which notification is sent, to

comply with the provisions in section 10.7 below.

A statement of approval shall not be issued unless all of the requirements

noted in the conditional approval have been met, and after the architectural

plans have been inspected and approved as being compatible with the

physical standards and Ministry requirements.

After meeting all of the conditions stated in the conditional approval, the

applicant shall receive a statement of approval.

Ministry of Tourism


It shall be noted that conditional approval is not “a letter of approval”

under the Law and does not make the applicant eligible for grants

and/or for any commitment of the Ministry and/or the state towards

the applicant and the “letter of approval” is the only approval

determining eligibility under the Law.

3.18. Any fundamental change to the details of the plan that is made after

approval, such as hotel type and rating, number of rooms, scope of

investment, etc., which would have influenced the feasibility of approval

had it been known in advance, shall be presented to the Administration to

be reconsidered.

In this case, the Administration reserves the right to revoke the

statement of approval and/or the conditional approval that was

granted, as well as the right not to update the statement of approval for

the new plans presented, and in addition, to forfeit the guarantee that

was given. The administration shall explain its decision.

3.19. Updating the investment ceiling in the course of the project:

3.19.1. Without derogating from the content of section 3.18 above, should the

process of inspecting and approving the suitability of the architectural

plans to the Ministry's defined physical standards reveal a change in the

hotel rating that makes it liable for a higher recognized investment

ceiling than that originally approved, the Administration shall not be

obligated to update the statement of approval accordingly.

3.19.2. A request for a low-cost hotel project, whose requested investment is

lower than 180,000 NIS per room, or for a hostel with an investment

ceiling lower than 45,000 NIS per bed, the scope of the recognized

investment will be determined in accordance with this estimate.

Should the plan be updated in the course of the project, in any event a

higher recognized investment will not be approved

3.20. All work to restore/convert the structure into a hotel, including receiving a

business license, occupancy approval and beginning of operation, shall be

completed within 30 months of the date that appears on the statement of

approval, as defined in section 11.4.1 below.

Ministry of Tourism


3.21. During the entire period of operation, the applicant shall not submit a

request for a change of designation or non-conforming use of the approved

project for purposes other than hotel accommodations, and shall operate the

hotel in accordance with normal hotel use and not for any other purpose,

including for "special hotel accommodations" as defined by the Director

General's circular from May 2009, or any other document to replace this

circular.

4. Submitting a request for "Approved Enterprise" status

4.1. A request per this procedure shall be submitted online via the Forms

system that is operated by Inbal Co.

In order to obtain access to this system, fill in the Initial Request for the

Tourism Investments Program form, which is attached to this document

as Appendix B. Questions and clarifications about the online system

should be addressed to the technical support team at 03-9778065.

4.2. After submitting the request via the Forms system, the applicant shall

produce an application report and submit it to the Ministry of Tourism in

addition to all of the documents required by this procedure. The form

and all attachments shall be submitted to the Economy, Investment

and Budget Division of the Ministry of Tourism no later than the

final date for submission of requests.

4.3. Please note that submitting a request for the first time may be a lengthy

process.

Also, the system and the technical support team are expected to be

overloaded as the final date for submission approaches, and therefore we

recommend beginning the process as soon as possible.

Failure to submit a request on time due to technical problems as

noted above shall not be considered valid cause for accepting

documents that are submitted after the final date for submission.

4.4. The Investment Administration reserves the right to contact all or some

of the applicants during the inspection and evaluation stage, in order to

clarify issues related to their requests or to ask for elaborations on

content of the requests that may be unclear. If the applicant does not

respond within the timeframe noted in the request, the application shall

be considered based on the documents and data that were submitted with

the request.

Ministry of Tourism


4.5. The Investment Administration reserves the right to reject any

application for reasons that will be documented, including if the request

is deemed unreasonable from planning/economic perspectives or if it

lacks explicit referrals to the requirements of this procedure which the

Ministry believes makes it impossible to properly consider the request.

5. Prerequisites

The applicants shall be required to meet all of the following prerequisites:

5.1. The structure or wing that has been designated for restoration for hotel

use has not been used as a hotel for at least 24 consecutive months

before the defining date for investment recognition.

5.2. Urban Construction Plan (taba):

5.2.1. The land on which the hotel building designated for restoration is

located has a valid urban construction plan (taba), and has been

designated for purposes described in the application. This shall

apply to the entire area of the designated plot.

5.2.2. Regarding a structure designated for conversion into a hotel – the

land on which the existing structure stands has a valid urban

construction plan that permits hotel usage, or a permit for non-

conforming use of the structure as a hotel for a period of at least

five years following the final date for submission of requests per

this procedure.

One of the documents required to determine whether this

prerequisite is met is the approval of the municipal engineer, as

defined in section 6.4 below. For projects that have received a

building permit per the regulatory urban construction plan which

allows addition of other designated touristic uses, e.g. number

101-0092-098, the corporation shall submit a valid hotel business

license and property tax payment report each year.

5.2.3. In the event that for the purpose of establishing/ expanding a

hotel the demolition of the existing construction is required on

the grounds where the hotel is to be established/ expanded, the

applicant will be required to present a valid demolition permit as

well.

The applicant will undertake as part of Appendix H1, that the

urban construction plan is not a process of change and that he

does not intend to make urban construction plan changes to the

plan in a manner that would delay the implementation of the plan

and the timetable prescribed in the procedure for its execution. If

the applicant does make changes to the urban construction plan

as stated, it will be considered a material breach of the execution

of the letter of approval.

Ministry of Tourism


5.2.4. In projects where construction permit was granted under a

regulatory urban construction plan, which allows the addition of

tourist purposes to other uses, such as in urban construction plan

number 101-0092-098, the corporation will undertake as part of

Appendix I to submit to the Ministry a valid business license for

a hotel business, and a report on the payment of municipal taxes

by the end of the first quarter of each year.

5.3. The applicant has been granted possession of the land on which the

structure designated for restoration or conversion stands, and rights to

the land that covers the entire area of the plot requested.

For purposes of this section, rights to the land means ownership or a

sales contract that has been fully paid, with an irrevocable power of

attorney document on behalf of the applicant in order to perform all of

the actions necessary to use the structure as a hotel, or a leasing

agreement that has been granted for a period of 18 years, or a suitable

and valid development agreement with the Israel Lands Authority.

5.4. The applicant shall have the financial ability to pay equity of at least

30% of the total investment required for the project. In its letter the bank

will clearly state that the financial ability relates to the project which is

the subject of the application, and will note the overall investment

required for the project.

If this confirmation is provided from a foreign bank, in addition to

approval from the foreign bank, the applicant shall submit a document

from a bank that holds a valid license per the Banking (Licensing) Law,

5741-1981 stating that the bank is familiar with the foreign one,

maintains commercial relations with it, and has confirmed the content of

the letter provided by the foreign bank.

5.5. The applicant has not received a grant, within the framework of this law,

to construct and/or expand a hotel for the portion of the structure for

which the application has been submitted.

5.6. If the applicant has previously received a grant to construct and/or

expand the hotel or wing for which the request was submitted, 12

months must have elapsed between the completion date of the final

investment, in accordance with the final implementation report that

confirms completion of the project and confirmation of compliance with

all of the terms that appear in the statement of approval, and the final

date for submission of applications per this procedure.

Ministry of Tourism


5.7. The applicant is not in the process of receivership and/or pre-

receivership and/or dismantling and/or declaration as a debtor with

limited means in accordance with the Execution Law, whether the

applicant or any controlling shareholder, and to the best of the

applicant's knowledge, is not expected to be involved in one or more of

these processes.

6. Documents to be included

Applicants shall include the following documents in their applications, after

they have been filled and signed as required:

6.1. Corporation registration in Israel:

- Business corporation registration certificate

- Corporation memorandum and regulations

- A printout of corporate data as it appears on the company registry

website

- Details of shareholders and signatories, formatted as shown in

Appendix D.

A corporation under establishment may submit a request, but must

declare the identities of future shareholders in the corporation. Once the

application is approved on principle by the investments administration,

the applicant shall be required to complete the corporation establishment

and registration processes and to present all of the relevant, updated

documents within 30 days of receiving notification of the

administration's decision, in order to receive conditional and/or final

approval.

6.2. Confirmation from the Tax Authority:

- Extended bookkeeping certificate in accordance with the Public

Entities Transactions Law (bookkeeping and tax payment

enforcement), 5736-1976

- A certificate of tax deduction at the source.

6.3. Confirmation on the rights to the land:

- Up-to-date confirmation of the applicant's right to the land in

question from the land registration office or from the Israel Lands

Authority, provided shortly before the application per this procedure

was submitted

- Or any other documents that testify to the applicant's rights to the

land as defined in section 5.3 above. The administration reserves the

right to demand complementary documents or obligations that it

deems necessary in order to meet this condition.

Ministry of Tourism


6.4. Urban Construction Plan (taba) documents:

- A valid urban construction plan (taba), as defined in section 5.2

above, for the entire plot of land that has been designated for

construction/ expansion of the structure, including verbal instructions

- Blueprints drawn to original scale, submitted as a hard copy, or on

digital media.

- If updating regulations referring to prior urban construction plans in

effect or affecting the valid urban construction plan, they shall be

included as well. When applicable, a permit shall be submitted for

non-conforming use of the structure as a hotel for a period of 5 years

as of the final date defined for submission of applications.

- Confirmation from the municipal engineer of the validity of the

urban construction plan, including a detailed list of the permitted

rights or approval for non-conforming use, as shown in Appendix E.

The applicant must notify in the application documents:

a. In existing projects where the existing urban construction plan

determines that it is possible to build a structure or structures of

mixed uses, what uses other than the hotel uses will be employed.

b. In projects that have been granted construction permits by virtue of a

regulatory urban construction plan that permits additions for tourism

uses for other designations, e.g. plan #101-0092-098.

Certification from a bank that holds a valid license per the Banking

(Licensing) Law, 5741-1981, indicating the applicant's financial ability

to lay out equity of at least 30% of the total investment required for the

project. The letter from the bank shall explicitly note that the necessary

finances are available for this specific project, as well as the total

investment required for the project. If this confirmation is provided from

a foreign bank, in addition to approval from the foreign bank, the

applicant shall submit a document from a bank that holds a valid license

per the Banking (Licensing) Law, 5741-1981, stating that the bank is

familiar with the foreign one, maintains commercial relations with it,

and has confirmed the content of the letter provided by the foreign bank.

6.5. The provision of a bank guarantee:

For the purpose of ensuring compliance with the terms of the conditional

approval, if granted, the corporation is required to file a bank

performance guarantee in a form identical to the performance guarantee

as stated in Appendix G and it shall be valid from August 15 2016 to

December 31 2017.

Ministry of Tourism


The amount of the guarantee will be determined depending on the scope

of the request:

a. A project where the scope of investment required is up to 5 million

NIS, a guarantee of 30,000 NIS shall be provided.

b. A project where the scope of investment required is over 5 million

NIS, a guarantee of 50,000 NIS shall be provided.

Should the corporation's request not be approved or alternatively upon

receiving the letter of approval and the provision of the performance

guarantee as stated in section 10.7.1 a, the guarantee will be returned.

6.6. Confirmation on the financial ability of the corporation as specified in

section 5.4 above.

6.7. A corporation that began carrying out construction / expansion works of

the hotel and filed an application before the publication of the Procedure,

the Ministry will assign an engineer on its behalf to determine a "zero

report". Payment to the examining engineer will be borne by the

Ministry.

6.8. If the structure has been designated for conservation, the approved

building conservation plan must be included as defined in section 76a of

the Planning and Construction Law, 5725-1965, and its fourth

amendment, which designates the structure for conservation, or

confirmation from the municipal engineer shall be submitted, indicating

that the structure has been selected for conservation in accordance with

the index managed by the specific municipality, while precisely

identifying the structure.

6.9. A map and/or photo that show the location and vicinity of the project.

6.10. Bank account details (copy of a check) as well as account management

confirmation from the bank and consent to provide bank account

information.

6.11. Signed commitment to comply with green building standard #5281, or a

request to build in accordance with principles of green construction and

sustainable tourism as defined in section 7.1.6 below, as worded in

Appendix F1 and F2.

Ministry of Tourism


6.12. Declaration and commitment by the applicant, formatted as shown in

Appendix I, Appendix J and Appendix K as well as according to the

request submitted in Appendix L.

7. Additional inspections before review by the administration

The applicant shall submit architectural plans, a financial review, and an

engineer appraisal as described below no later than 41 days after the last day

for submission of applications per this procedure, i.e. by September 25

2016:

7.1. Architectural plans

7.1.1. The applicant shall submit detailed architectural plans for the

hotel's restoration/conversion project which comply with the

physical standards. The plans shall be submitted both in printed

format and as computerized files to an architect who will inspect

them on behalf of the Ministry (hereinafter: inspection

architect). The plans shall require the approval of the Ministry's

architect, as defined in section 10.7.2 below.

7.1.2. The applicant shall submit corrected/completed plans as

requested by the Ministry's architect or by the inspection

architect within 21 days of receiving a request in writing.

7.1.3. Payment for the inspection performed by the architect shall be

transferred by the developer to the Ministry's account, per an

invoice to be sent by the Ministry5. The applicant shall be

required to transfer payment only after the Administration

decides to approve the request.

7.1.4. It is hereby clarified that a structure that does not comply with

the required physical standards will be considered not to have

met the requirements of this procedure and shall not be approved

nor shall it receive a grant.

7.1.5. In a project where the applicant has undertaken to submit a

request for a rating process according to the method prescribed in

tourism the Hotel Services (Hotels) Regulations, 5773 – 2013 (as

stated in in Appendix L), easements will be given in the process

of approval of the adjustment according to the physical standards

according to the discretion of the Ministry’s architect, should

these be required.

7.1.6. A project for which a request is submitted shall sign a document

indicating its commitment to meet green construction standard

5281, as appears in Appendix F1. If this is impossible, the

Ministry shall be entitled to replace this requirement with the

5 See: payment guidelines and compliance with physical standards as appears in the Director General

circular dated May, 2008 at: www.tourism.gov.il > touristic development > physical standards for

facility planning and classification.

http://www.tourism.gov.il/

Ministry of Tourism


requirements that appear in Appendix F2 in order to promote

green, sustainable construction.

7.1.7. The Ministry may summon the developer to present the project

before the professional team determined by the Chairman of the

Investments Administration for familiarization with the project.

7.2. Engineer inspection

7.2.1. The project the subject of the request shall undergo a preliminary

examination by an engineer from the Ministry of Tourism based

on the architectural plans, who will visit the requested project in

order to determine the need for a building permit and to assess

the required investment for these actions.

7.2.2. If the engineer estimates the required investment as less than the

sum that appears in the request, the recognized investment shall

be determined based on this estimate, and in any case, the

recognized investment for a project shall not exceed the total

recognized investment ceiling.

7.3. Assessment of financial profitability

The applicant shall submit a financial review to assess the financial

profitability of the project for the developer, the corporation and the

economy. The review shall be conducted using a computerized system6

that is based on the Ministry of Tourism financial model.

The applicant will be charged for payment for the review only after the

Administration decides on the approval of the request.

8. Consideration of requests

8.1. Applications that meet the prerequisites and complete the required

inspections as described in section 7 above shall be considered as

described in section 9 below.

8.2. Applications that do not meet the prerequisites shall be rejected outright,

without considering the content of the request.

8.3. Applications, for which the inspections described in section 7 were

not completed on schedule, shall not be reviewed and instead, shall

be archived. The administration shall inform the applicant when

this is the outcome.

6 Guidelines for preparing a financial review and cost of review can be found on the ministry website at

www.tourism.gov.il > touristic development > assessing financial profitability of hotels

http://www.tourism.gov.il/

Ministry of Tourism


9. Grant allocations

9.1. The total budget to be allocated for this funding track shall be divided

between the preferred tourism areas as defined in the ordinance,

including a map of preferred locations for hotels and/or motels (as

submitted in the application), and based on the existence of necessary

budgets.

9.2. If, after considering all of the requests that meet the prerequisites and

that completed the inspections required per section 7 above, it becomes

evident that the total budget required to approve all of the projects

exceeds the allocated budget, the applications shall be rated according to

the criteria defined in Appendix C.

9.3. In accordance with government ruling #4254, dated February 12, 2012,

grants given per the Encouragement of Capital Investments Law as part

of the construction/expansion or restoration/conversion tracks at the

Dead Sea shall be budgeted separately in 2016, up to a total of 128

million NIS.

Should the required budget to approve all of the requests for hotels at the

Dead Sea exceeds the allocated budget, the requests for the Dead Sea

shall be rated according to the criteria defined in Appendix C, with any

necessary changes.

9.4. The applications that receive the highest scores shall be considered by

the investment administration until the entire budget allocated for this

procedure has been utilized.

9.5. When an application will not be included in the budget framework

defined for this track due to the rating process defined, the applicant

shall be informed of the status of the request.

10. Administration procedure for receiving a statement of approval

10.1. The Ministry reserves the right, based on the documents submitted, the

architectural plans, the financial review, and the engineer report if

required, to instruct the applicant to change and/or correct components

of the request.

Ministry of Tourism


10.2. Applications that meet all of the prerequisites, the requirements listed in

section 6 above, and for which all of the requirements defined in section

7 have been completed, shall be considered by the administration,

subject to section 9 above.

10.3. If the applicant failed to meet the conditions and requirements by the

time of approval of the request’s eligibility to be brought for discussion

at the Administration, or until the receipt of a letter of approval, the

Administration reserves the right to reject the request and/or forfeit the

guarantee.

10.4. Written notification of the Administration's decision shall be sent to the

applicant.

10.5. If the Administration decides to approve a request, the applicant shall

receive notification that conditional approval has been granted for

"approved enterprise" status for restoration or conversion of the structure

into a hotel.

10.6. Upon receiving notice of conditional approval for a request for

"approved enterprise" status, the applicant shall:

10.6.1. Within 60 days of the date on which notification was sent:

a. Deposit an autonomous and unconditional bank guarantee

(hereinafter: execution guarantee) by an Israeli bank or

insurance company that holds a license to engage in

insurance as required by the Supervision of Financial

Services (Insurance) Law, 5741-1981, and as appears in

Appendix G, for a sum of 5% of the grant that has been

approved within the framework of this law, linked to the

consumer price index published for that date, to guarantee

completion of all commitments on schedule, and valid for 42

months.

In any case in which the validity of the statement of approval

is extended, the bank guarantee shall be extended as well for

a period of one year after the expiration date of the extended

statement of approval.

b. Registration of a warning note:

- Submit an extract that indicates registration of a planning

warning note at the Lands Registration Office, as required

by the Ministry, regarding the designation of lands

allocated for this project, the use of these lands, and

prohibiting designation changes or non-conforming use of

the land for purposes other than hotel development

Ministry of Tourism


without the approval of the Ministry of Tourism, per

regulation 27 of the Lands Regulations (Management and

Registration), 5730-1969 and sign the form attached as

Appendix H1.

- In unusual cases and subject to the Ministry’s approval,

when a warning note cannot be registered per regulation

27, a request can be submitted to the Ministry to instead

require a registered warning note per section 128 of the

Lands Law, worded as determined by the Ministry and

sign the form attached as Appendix H2.

- When the asset is owned by the Israel Lands Authority

and/or has not been registered with the Lands Registry

Office, a liabilities deed shall be submitted as appears in

the attached Appendix H2. This deed shall be included as

an appendix to the leasing agreement for the land signed

with the Israel Lands Authority.

10.6.2. Receive approval of the Ministry for accommodation of the

architectural plans to the physical standards and Ministry

requirements, to satisfy the requests of the Ministry architect,

while ensuring that 90 days do not elapse from the day on which

the conditional approval document was issued. Extension of the

date for approval of the plans beyond the dates that appear in this

procedure shall be requested in writing and with justifications by

the developer, and shall require the prior and written approval of

the Ministry.

10.7. Once the Ministry approves that all of the necessary actions have been

taken and all of the documents listed in 10.6 above have been submitted

on schedule, the applicant shall receive a letter of approval. The letter of

approval shall bear the date of the conditional approval.

10.8. It shall hereby be clarified that the conditional approval does not entitle

the applicant to grants and/or obligations of any kind by the Ministry

and/or the government to the applicant, and the declaration that entitles

the applicant to the grant is the statement of approval only.

10.9. The execution period for a statement of approval shall be 12 months at a

time, from the date of the letter of approval. In order to extend a

statement of approval, the owner of the statement shall contact the

Ministry and request an extension of the execution period:

10.9.1. Extension of the statement of approval during the first year shall

depend on meeting the terms defined in section 11.1 below,

among other requirements.

Ministry of Tourism


10.9.2. Additional extensions shall be determined based on meeting

deadlines as defined for the milestones that appear in section

11.4 below.

11. Execution stages and grant payments

11.1. The applicant shall meet all of the terms listed below within 10 months

or less of receiving the statement of approval:

11.1.1. Building permit – the applicant shall produce a building permit

that has been approved by the local council for the entire

construction plan approved by the Administration, if the work

needed for restoration/conversion requires a permit.

11.1.2. Funding program – the applicant shall present approval from the

bank of a detailed funding plan that lists the sources for funds

required in order to complete the project, in accordance with the

statement of approval. Funding sources shall include: equity,

owner loans, bank/institutional credit, and the grant. The

Ministry reserves the right to approve other sources of funding,

per its own discretion.

11.1.3. Projects that have been approved based on approval for non-

conforming use for the hotel industry shall present

confirmation of the request submitted to the local planning

and construction committee for a change in the urban

construction plan as described in section 3.3.2.

11.2. Approved plans for engineers – building permit plans that have been

approved by the local committee shall be submitted to the inspecting

architect appointed by the Ministry of Tourism to be approved for

engineers. If the work needed does not require a building permit, the

approved architectural plans will serve as the "approved plans for

engineers".

11.3. Overseeing the project

11.3.1. The Ministry shall oversee the project from an engineering

supervision perspective and approve grant payments via

companies that it selects, to be referred to as the overseeing

entity hereinafter.

11.3.2. After receiving the approved plans for engineers and when the

work that receives a statement of approval begins, the developer

shall contact the execution and tracking supervisor at the

Ministry and request that an overseeing entity be appointed.

Ministry of Tourism


11.3.3. Correspondence between the developer and the overseeing entity

and the Ministry in order to submit execution reports, requests

for grant payments, and various updates regarding the statement

of approval, shall be conducted via the Shenhav computerized

system. Instructions on using the system, as well as a username

and password, shall be provided by the overseeing entity.

11.3.4. The overseeing entity shall instruct the developer to sign a

liability deed and government bond and register a floating lien on

the company assets, in order to guarantee that the approved plans

are implemented and that the hotel will be operated as required

by the statement of approval.

11.3.5. An engineer representing the overseeing entity shall visit the site

of the project per the request of the developer and as a

prerequisite for receiving grants per any request for payment, as

defined in section 11.5 below.

11.3.6. When the investment approved by the statement of approval for a

project is less than 15,000,000 NIS, the number of engineer visits

shall be limited to six. When the investment for a project that has

been approved by the statement of approval exceeds 15,000,000

NIS, the number of engineer visits shall be limited to twelve.

Should additional visits be required, the cost of the engineer's

visit shall be paid by the developer, in accordance with valid

ministry rates at the time of the visit.

11.4. Project milestones:

11.4.1. To comply with the terms specified in section 11.1 above – no

later than 10 months from the date of the letter of approval.

Progress on the project that corresponds with at least half of the

total investment – to be completed no later than 24 months after

receiving the statement of approval.

Present an occupancy form and business license for the hotel and

for opening no later than 30 months after receiving the statement

of approval. At this stage, the applicant shall present a new urban

construction plan indicating hotel designation, if necessary.

11.4.2. The execution of the project on the dates of the milestone is an

essential condition in the letter of approval. Should the

corporation fail to meet the schedule it shall inform the

Administration of the fact with an explanation of the reasons for

the delay.

11.4.3. Should the corporation fail to meet these milestones in the above

times, the Administration shall be entitled to forfeit the

performance guarantee, in whole or in part, at its discretion.

Ministry of Tourism


11.5. Grant payments:

While executing the project, grant payments shall be made as follows:

11.5.1. The first grant payment shall be made after completing at least

20% of the approved investment for the project.

11.5.2. Additional payments shall be made per reported and approved

investments of at least 10% of the total approved investments at a

time in projects of up to 15,000,000 NIS, and of at least 5% at a

time in projects of over 15,000,000 NIS.

11.5.3. For structures to be converted into hotels, payments shall not

exceed 80% of the total amount in grants to which the project is

entitled, until receiving approved urban construction plans that

designate the plot for hotel use.

11.5.4. The final payment shall be no less than 10% of the total approved

grant in the statement of approval and shall be paid after

receiving the following:

a. Upon the submittal of a final execution report (FER) – the

applicant shall be entitled to 5% of the total approved grant,

for the execution plan submitted by the applicant after

making all investments detailed in the approved plan,

presentation of a valid business license for the hotel and

notice to the Ministry on the opening of the hotel.

In cases in which the land is owned by the Israel Lands

Authority and a development agreement has been presented

as proof of ownership upon submission of this request, grant

payments will be made only after a leasing agreement with

the Israel Lands Authority has been presented.

A project for which an undertaking was made to submit a

request to join the rating process, he shall present the request

submitted by him.

In cases of approval for non-conforming use, change to

designation for hotel use shall be made in the urban

construction plans for the approved project.

b. The final payment of the remainder of the grant – shall be

made against approved of the FER by the Ministry.

11.6. Guarantee for execution

11.6.1. After 50% of the approved investments have been made and after

completing the second milestone, the developer may request that

the guarantee be reduced by 50%.

Ministry of Tourism


11.6.2. When presenting the occupancy form and a valid business

license to operate and open the hotel, the developer may request

that the guarantee be reduced by an additional 30% (total of

80%).

11.6.3. The remaining guarantee shall be returned to the developer upon

approval of the final report of completion of the project and

presentation of a lease agreement, as specified in section 11.5.4

above. In addition, in the case of a structure that has been

converted into a hotel but has not yet submitted an approved plan

for changing the designation of the plot for hotel use, the

remaining guarantee shall be returned after submitting an

approved plan for changing the designation of the relevant plot

for hotel use.

11.6.4. In case of delays in changing the designation and/or registration

of transfer and/or approval of the final report of completion of

the project as noted, beyond the period of the guarantee, the

developer will be required to extend the validity of the guarantee

for one additional year at a time.

11.7. At all times, the developer shall allow the Ministry or anyone appointed

on its behalf to supervise activities, oversee the project and ensure that

all ministry guidelines are followed.

11.8. Failure to comply with the terms and conditions of this procedure, the

statement of approval or legal requirements, including the liabilities

listed in Appendix I, J, K and L, shall be considered valid grounds for

revocation of the state of approval, forfeiture of the guarantee, and/or

demand to return the grant money.

11.9. The applicant shall adhere to intellectual property laws that are passed

from time to time in the State of Israel. Should a final and

peremptory ruling in a court in Israel convict the applicant of violations

of Israel's intellectual property laws, the Administration reserves the

right to retroactively revoke all benefits and/or grants in full or in part

and to demand from the applicant that they be returned, with interest and

linkage differentials as required by law.

12. More information can be found on the Ministry’s website at:

https://www.gov.il/he/Departments/ministry_of_tourism Infrastructure

development and investment> Investment in Tourism Administration, or contact

Ms. Orit Hemed, the Economics Supervisor at the Economy, Investments and

Budget Division in the Ministry of Tourism, Tel No. 02-6664384/ 94 or email:

[email protected], [email protected]. In addition you can contact

the Division Secretariat on Tel: 02-6664390/1/4.

https://www.gov.il/he/Departments/ministry_of_tourism

mailto:[email protected]

mailto:[email protected]

Ministry of Tourism


Procedure 02/2016 – Appendix A – Recognized investment ceiling per

room for construction of new hotels

(This ceiling is updated on a monthly basis)

Month Points (Base index January 1992 = 100)

June 2016 292.8974

Investment Ceiling in NIS

Hotel with rooms, Level A, Vacation 952,675

Hotel with rooms, Level A, Urban 840,287

Hotel with rooms, Level B, Vacation 706,505

Hotel with rooms, Level B, Urban 609,024

Hotel with rooms, Level C, Vacation 495,140

Hotel with rooms, Level C, Urban 423,157

Hotel with rooms, Level D, Vacation 381,877

Hotel with rooms, Level D, Urban 309,431

Suite hotel, Level A, Vacation 990,942

Suite hotel, Level A, Urban 877,720

Suite hotel, Level C, Vacation 629,964

Suite hotel, Level C, Urban 522,968

Motel with rooms, Level A, Vacation 606,886

Motel with rooms, Level A, Urban 515,549

Motel with rooms, Level C, Vacation 338,183

Motel with rooms, Level C, Urban 220,114

Suite motel, Level A, Vacation 704,478

Suite motel, Level A, Urban 585,795

Suite motel, Level C, Vacation 473,373

Suite motel, Level C, Urban 394,136

Vacation village, Level A 939,685

Vacation village, Level C 516,742

Youth hostel (per bed) 106,851

Ministry of Tourism


Procedure 02/2016 – Appendix C – Criteria and priorities for budget

allocation

Each application will be considered and scored according to the following criteria

Project location (up to 30 points)

Jerusalem 30 points

Tiberias 25 points

Nazareth, Sea of Galilee area, Eilat and Mitzpe Ramon 20 points

Coastal cities 18 points

Other areas on the relevant map of preferred areas* 15 points

*other than the Dead Sea, see section 9.3

Building permit for the proposed project (up to 15 points)

Applicants that hold a valid building permit as required by law for the entire project at

the time of submission of this application will be granted 15 points. An excavation

permit or a positive conditional decision by the relevant planning institute will earn

the applicant 10 points, and submitting a request for a building permit will earn 5

points for the project.

A project that does not require a building permit shall be granted 15 points.

The nature of the project – conversion (15 points)

A conversion project receives 15 points.

Low-cost hotels (10 points)

Request for the establishment of a low-cost hospitality facility, for which the

requested investment ceiling of less than 250,000 NIS per room, or for a hostel an

investment ceiling of 45,000 NIS per bed, will be rated proportionally so that the

request with the lowest ceiling will be credited with 10 points and the request with the

high ceiling will be credited 1 point.

Number of rooms in the request (up to 15 points)

The number of rooms to be converted or restored for hotel use per this application.

Up to 20 rooms

(inclusive)

21-50 rooms

(inclusive)

Over 51 rooms

Points 5 10 15

Ministry of Tourism


Unique features of the project and its compatibility with ministry policies (up to

10 points)

- Low-cost hotels (levels C, D or a hostel)** (up to 10 points).

- Location of the project in relation to significant proximity to popular tourism

areas, such as: beaches, historical sites (up to 10 points)

- Unique features of the project, such as: theme tourism - desert tourism, wine,

sports, biking, etc. (up to 10 points)

- Compliance with the Ministry’s policy, structure for conservation, contributing

to the environment or employment, the development of periphery/ area of

conflict with “pioneering hotels”, the use of natural gas for energy facilities at

the facility and the like; (up to 6 points)

Undertaking to a rating proceedings (5 points)

A project which will undertake to bring the hotel, for which the application was filed,

into the process of rating, in accordance with the signing of Appendix L, shall credit 5

points.

Total maximum score for all criteria – 100 points

If multiple projects receive the same score, in order to prioritize the projects they shall

be rated in accordance with their size. Highest priority shall be given to hotels with

the largest final number of hotels rooms.