State to Radically Revise Investment Incentives

The state plans to change the criteria for giving grants under the Law for the Encouragement of Capital Investment, and will henceforth award them only to firms in outlying, developing areas in the north and south. Also future grants will constitute no more than 20% of the approved investment, according to proposals made during discussions on formulating the 2011-2012 budget.

Instead of the present grants, the Investment Center in the Industry, Trade and Labor Ministry will offer loans in certain investment frameworks, as well as benefits in addition to tax breaks, which will also be reduced. Today, such grants can reach 24% of investment, and are distributed in developing areas not in the periphery.

The ministry is currently working with the treasury on a new map of "national priority areas." The present map, which is only valid through the end of 2010, includes areas that are roughly south of the Ashkelon-Dead Sea line; in the north, it extends from the Lebanon border down to Acre, Nazareth and Beit She'an, and includes a number of other locales such as Yokneam and Caesarea. The new map will totally change the rules and is due to be completed by the end of the month.

Companies seeking a grant will also be required to cut pollution levels and take other measures to protect the environment. Government companies and their subsidiaries will not be eligible for such funding, but can receive other benefits. In addition, the grants are only meant for firms that could conceivably start businesses abroad.