The Intel logo
The Intel logo Photo by Bloomnberg
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Intel Corporation, the American semiconductor giant, is in negotiations with the Israeli government over the tax bill for a planned NIS 12 billion dividend it wants to pay out from funds it has accumulated in the country.

The company is prepared to pay taxes totaling NIS 2.3 billion if allowed to take the funds out of Israel. Its tax experts say that is the full amount of taxes due on the income, but some government officials say the company owes more.

The Encouragement of Investment Law, which has been amended recently, used to ban companies like Intel that have received state aid through the Ministry of Trade, Industry and Employment from repatriating dividends at all. Under the revised law, which allows dividends to be transferred abroad, Intel's payout would be assessed at a 25% tax rate.

Some government officials say they regard the profits earned by Intel before the law was amended as different from those earned afterward. Intel had informed them that the dividend payout was aimed at earning a tax credit in the United States, and that the money would be returned to Israel for investment inside the country, the officials said. However, they expressed doubt about what Intel would ultimately do with the funds.

Intel, which operates a giant semiconductor fabrication facility, has received billions of shekels in state aid over the years. It is currently in talks with the government about grants for a new facility.

The Finance Ministry willhave a difficult time explaining why i t is granting assistance when the government is weighing budget cutbacks and higher taxes.