Israel to expand tax breaks to boost investment in start-ups

JERUSALEM, July 16 Wed Jul 16, 2014 8:18am EDT

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JERUSALEM, July 16 (Reuters) - Israel's government plans to expand tax breaks to investors funding early stage start-ups as part of its strategy of promoting economic growth through innovation, the finance and economy ministries said on Wednesday.

The state in 2011 started offering tax incentives to so-called angel investors who invest in seed companies but the criteria has been deemed complicated and investors need to monitor a company for three years. As a result, investments under this programme were made in about 60 companies, which raised only 100 million shekels ($29 million), according to the finance ministry.

To encourage more seed stage investment in the wake of a lack of funding from venture capital funds, the ministries have proposed simpler criteria for tax incentives such as deducting the amount invested from taxes owed.

Under the new track, investment would need to be in start-ups that are less than three years old, earn no more than 1.5 million shekels in annual revenue and incur expenses up to 3 million shekels.

The plan, which would come into effect in 2015, still needs approval from the socio-economic cabinet.

Israeli high-tech companies raised $1.6 billion in the first half of 2014, an increase of 81 percent from a year earlier, making it the strongest capital raising period on record for Israel's high-tech industry, according to the Israel Venture Capital (IVC) Research Center.

But seed companies only accounted for 5 percent of that amount, down from 7 percent in the first half of 2013.

($1 = 3.4077 Israeli Shekels) (Reporting by Steven Scheer)

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