The Knesset approved a law which grants tax benefits to investors in the hi-tech sector, as well as benefits to companies purchasing or merging with other companies, on Tuesday evening.

The law aims to make Israel an attractive destination for investors.

According to the law, private investors who invest in new start-up companies will receive a tax credit in the amount of the investment amount multiplied by the capital gains tax rate applicable to the investor. Shareholders who use part of the proceeds from the sale of a tech company for the purpose of investing in a start-up will also receive a postponement of the tax payment for the capital gain generated from the original sale.

An additional benefit provided by the law is that a large tech company that acquires control of another tech company will be able to deduct the expense for the purchase of the shares from its tax liability, at equal annual rates for five years from the date of purchase.


Foreign financial institutions will also receive a tax exemption on the income from interest, discount fees, and indexation differentials for loans given to Israeli tech companies.