The State of Israel encourages both local and foreign investment by offering a wide range of incentives and benefits to investors in industry, tourism and real estate. Special emphasis is given to hi-tech companies and R&D activities.
Investment incentives are outlined in the Law for the Encouragement of Capital Investment.
The incentive programs can be divided into 2 main types:
1- The Grants program
2- The Automatic Tax Benefits programs

Grants program
Investments approved according to the Grants program are awarded Approved Enterprise status and Privileged Enterprise status if it chooses one of the tax benefits programs.
Approved Enterprises in a development (priority) area may receive fixed asset grants of 10%-32%.  In addition, approved enterprises may benefit from low company tax rates of 10%-25% for a period of seven to fifteen years.  

Privileged Enterprises owned by an Israeli company may elect a "tax holiday package" without obtaining approval if a minimum qualifying investment has been made in fixed assets in industry and in a hotel in Israel within a three year period.  The tax holiday applies to undistributed profits for two to fifteen years depending on the location and foreign ownerships. The combined total benefit period for the tax holiday and low rates can range from seven to fifteen years.

Dividend Tax (Dividend withholding tax) is imposed at a reduced rate of 4% or 15%, depending on the package selected.  As a result, the combined company and dividend tax rate ranges from 15.4% to 36.25%.

Tax Exemptions
Foreign residents not doing business in Israel may enjoy an exemption from Israeli capital gains tax (taxes paid in the investor's home country) in the following cases:

· Investments in Israeli securities made between July 2005 and December 2008 if the investors reside in a country that had a tax treaty with Israel during the 10 years before their investment and report it within 30 days to the Israeli Tax Authority.
· Shares in a research-intensive company that were issued to the foreign resident investor on or after January 1, 2003.
· Venture capital funds that obtained an advance tax ruling from the Israeli tax authorities.
· Securities from Israeli companies traded on a recognized foreign stock exchange.
· Exemption under any applicable tax treaty (restricted to fewer than 10% shareholders in the US-Israel tax treaty.

Contact
Investment Promotion Center
Ministry of Industry, Trade & Labor
5 Bank of Israel St.
Jerusalem 91036
Tel. 972-2-666-2607
Fax: 972-2-666-2938
For more information, please contact the local Israeli economic mission overseas or visit the IPC website: www.investinisrael.gov.il