New Amendment Will Encourage Investments from New Investors by Raising Assurances Regarding Tax Benefits
JERUSALEM. December 30th, 2015 –The Knesset Finance Committee approved the proposal of Prime Minister and Minister of Economy & Industry Benjamin Netanyahu and Minister of Finance Moshe Kahlon to amend the Angels Law with a goal of encouraging investments in early-stage startups. This significant step by the Israeli government is intended to increase the amount of capital available for investment in startups.
With an eye towards preserving the relative edge the State of Israel enjoys in its knowledge-intensive industries, the government has decided to offer tax incentives that will propel new companies to develop innovative ideas, helping them become larger commercial companies. Many seed-stage companies are in need of funding to help them develop and the Israeli government recognizes the need to encourage investment in these early-stage companies to promote continued entrepreneurial and innovative activity in the economy.
As part of the amended law, investors in early-stage startups declared eligible by the Office of the Chief Scientist will receive significant tax benefits – they will be allowed to deduct all sums invested in early-stage startups from taxable income.
Also as part of the amendment, a new track for receiving these benefits will be opened, along with an extension of those benefits already provided by the existing law. The program will make it more attractive to invest in early-stage startups because investors will be certain of their eligibility for tax benefits at the time the investment is being made. In addition, startups situated in peripheral areas will retain startup status for 5 years, as opposed to the 4 years in which companies from the center of the country retain that status. The Knesset Finance Committee approved the proposal for four years (until the end of 2019). The Minister of Finance is authorized to extend the order by an additional four years, contingent upon the agreement of the Finance Committee.