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Intel Corp. is asking the Israeli government to give it the status of an "especially preferred company," which would lower its tax rate to just 5% of sales turnover. Government sources say Intel Israel's present tax rate averages about 12% of turnover, because of various incentives from the government.

Jerusalem has already approved an especially large government grant for Intel Israel: $678 million, for investment in its new foundry in Kiryat Gat.

The chipmaking giant submitted its request to the Finance Ministry and the Industry, Trade and Labor Ministry a few weeks back, but no decision has been made yet.

Under the law, both ministers have to make recommendations regarding requests of the sort. The criteria guiding their decision include whether they think the company would substantially contribute to Israel's economy and advance the government's national goals.

Intel's request for the lenient tax treatment is based on a new article in the Investment Encouragement Law that redefines "strategic investor."

An international company whose local operations are based in "development area A", which includes Kiryat Gat, may receive the status of "especially preferred company," if it also meets certain other conditions.

Those include minimal sales turnover of NIS 1.5 billion a year by the local outfit and annual turnover of at least NIS 20 billion a year by the global company.

The company also has to have at least 250 new employees, to invest at least NIS 100 million a year in research and development or invest at least NIS 400 million in manufacturing assets. Intel meets all the criteria.