Israeli Tax Alerts | Practical Interpretations | 2008-2020

78 procedure does not include concessions at the level of the collection of tax, and it does not include the possibility of making an anonymous application to the Tax Authorities. 3. Encouragement of Distribution of Profits - Temporary Order On August 6, 2012, a Bill was published to amend the Law for the Encouragement of Capital Investments (hereinafter: the "Law"), which determines a temporary order for a period of one year from the date of the publication of the Law, once it shall be amended, pursuant to which a company which has accumulated tax-exempt profits pursuant to the Law may distribute them or may release them, whilst receiving a discount from the corporate tax which should have been paid at the time of the distribution (hereinafter: the "Released Profits"). The rate of the discount ranges between 30% to 60% out of the "regular" tax which should have been paid, as detailed below: Pursuant to the regular provisions of the Law, many companies benefited from an exemption from corporate tax on their qualified profits. However, the exemption is a temporary exemption, up until the date of the distribution of the qualified profits as a dividend. At the time of the distribution, the said companies are required to pay the corporate tax which was deferred at the rates which range between 10% (in the event of a company with a foreign ownership of 90% or more) and 25% (a "regular" company). Due to these provisions, many companies refrained from distributing their accumulated profits and according to an estimate made by the Israeli Tax Authority, this matter concerns accumulated profits in a total amount of approximately NIS 100 billion (approximately US$ 25 billion). According to the temporary order, companies which wish to do so, may release the profits which have accumulated thereat by December 31, 2011, by paying a reduced rate of corporate tax, as aforesaid; there is no need to make an actual distribution of the said profits . At the time of a future distribution of the said profits which have been released, no additional corporate tax shall apply, but only the tax on the dividend (at a rate of 15%, subject to tax treaties' provisions). The rate of the discount (as aforesaid, a discount ranging between 30% and 60%) shall be determined linearly in accordance with the proportion of the released profits out of the amount of the accumulated profits. Thus, if the full amount of the accumulated profits is released, the rate of the discount from the tax is 60%, provided that the rate of the tax after the discount shall be not less than 6%. The Bill does not include stipulations with regard to the manner of the use of the Released Profits, however we shall note that in light of the discussions of this matter at the Knesset