The Israeli Knesset parliament recently approved the new law for the encouragement of capital investments

The Israeli Knesset parliament recently approved the new law for the encouragement of capital investments, which will cut corporate taxes to as low as 6 percent by 2015.

Under the new law, which qualifies any industrial company that exports part of its production, corporate tax will gradually be lowered so that by 2015 companies located in the center of the country will pay just 12 percent, while those located in the priority area, in Israel's north or south, will pay 6 percent.

"The companies who are eligible for the reduced corporate tax rates are industrial companies which export at least 25 percent out of their revenues abroad, while the companies in the priority areas are eligible as well for capital grants from the Investment Center," Sharon Kedmi, director general at the Ministry of Industry, Trade and Labor told Xinhua.

In an additional effort to promote development in Israel's periphery, companies located in priority areas will also be eligible for investment grants of 20 percent of an approved investment plan. The dividend tax for all eligible companies in all areas will be set at 15 percent.

As government officials lauded the considerable efforts in encouraging investment, Israeli economists noticed the negative impact to state-owned enterprises and showed discretion in evaluating the new policy.

NEW INCENTIVES

Large corporations with a turnover of more than 1.5 billion shekels (1 shekel = 0.29 U.S. dollars) and a combined balance sheet of 20 billion shekels will be entitled to a company tax rate of 8 percent in the center of the country if they invest at least 800 million shekels in capital improvements. Those in priority areas that invest at least 400 million shekels will be entitled to a tax rate of 5 percent.

These criteria can be interchanged with R&D investments or a large employment program by the company, the Ministry of Industry, Trade and Labor noted in a statement.

"The reform in the law for the encouragement of capital investment in Israel, which went into effect in 2011, creates an especially attractive tax environment for industrial companies in Israel," said Eden Kanovsky, chief spokesperson for the Manufacturer's Association of Israel, adding that the tax rates were among the lowest in the world.

She noted that the revisions made to the law would form a powerful front alongside other incentives to encourage investments, such as those geared at the employment of workers and increasing productivity.

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