With the aim of encouraging the Israeli Hi-Tech industry and innovative research and development in Israel, as well as the aim to attract highly qualified human resources to Israel, it is proposed to grant a tax exemption on royalty income paid to a "beneficiary resident", for a period of 5 years.

According to the proposal, scientists or researches that are invited to Israel by an academic institution, or a hospital, to work for their R&D companies in Israel, may enjoy a tax exemption on their royalty income, paid to them by the R&D Company in Israel originating in export transactions).

The said exemption will only be granted to scientists or researches that will become "beneficiary residents", or in other words, will become a veteran resident or a new immigrant (as defined in the Israeli Income Tax Ordinance) until the end of 2015. In addition, the beneficiary resident has to sign a contract with the Israeli R&D company within two years from the end of the tax year in which he arrived or returned to Israel. In any case, the entitlement for the benefit has to be approved by the Tax Authority inIsrael.

In this context, we may mention that a beneficiary resident who derives royalty income from sources outside of Israel can use an Israeli family company in order to enjoy a tax exemption on such income (for more information, see tax news alert No.6).