Sources inform ''Globes'' that the Prime Minister's Office and Ministry of Finance are formulating administrative regulations to ensure that foreign investors making non-financial investments in Israel over the next three years will be exempt from capital gains taxes on the sale of the assets. This limited window of opportunity will open when the Bachar committee recommendations for reforming the capital market are passed.
The main purpose of the measure is to encourage leading international asset management companies, especially US ones, to buy assets that Israel's banks will be required to sell under the Bachar recommendations: mutual and provident funds, and holdings in insurance companies.
Foreign investors will be able to sell these investments in whole or in part in the short or long term, while enjoying full exemption from capital gains taxes. Foreign investors will pay current taxes, including corporate taxes, during the period of the holding.
The tax exemption will not apply to individual investors or companies in countries with which Israel does not have tax treaties, especially tax havens. The removal of these countries from the measure is intended to make it more difficult for Israelis to appear as if they are foreign investors in order to benefit from the proposed tax exemptions on the investments. The Israel Tax Authority can obtain information from countries with which Israel has tax treaties.
Published by Globes [online], Israel business news - www.globes.co.il - on June 2, 2005