Law for the Encouragement of Capital Investment

This law provides tax incentives for investors in Israel. The law also serves as a significant tax planning tool.

If you want to create a new building for long term housing, you’re entitled to tax benefits under the Law for the Encouragement of Capital Investment.

Others eligible for this tax benefit include entrepreneurs interested in creating or expanding factories which produce products or services for export and those opening hotels in certain areas.

Our office can advise and assist you in acquiring the status necessary to receive these benefits.

To qualify for benefits under the law, investors must be an industrial company registered in Israel and have export capabilities to be competitive internationally (biotechnology and nanotechnology companies are exempted from the export requirement).

An “industrial company” is defined by the law as an Israel-based enterprise wherein the main activity is the creation of products or services for export (other than in an approved agricultural enterprise).

“Productive activity” is defined by the law as the development and production of computer software products, industrial research and development for a foreign resident (on condition of approval by the Director of the Industrial Research and Development Administration), and other activities designated by the ministers, except for:

  • packaging
  • construction
  • commerce
  • transport
  • storage
  • providing communication services
  • providing personal services
  • providing sanitation services
  • other activity designated by the ministers

The law divides investment priority into two areas:

  • The Priority Area includes the Galilee in the north, the Negev in the south, and Jerusalem.
  • The Center of the country includes all other areas not included in the Priority Area.

Companies that qualify are entitled to special tax rates. There is no termination period for the tax benefit; so long as the company remains internationally competitive, it is eligible for the tax benefit described by the law.

Watch a video of Ido Shacham representing the Israeli public at the Israeli Knesset Financial Committee in regards to the Laws of Encouragement:

For additional information about tax benefits on income-producing real estate, follow this link:

Ministry of Economy.

And article link: Amendment 74 to the Encouragement of Capital Investments Law is unconstitutional.