JERUSALEM, Nov 10 (Reuters) - Israel Chemicals (ICL) said on Sunday it took advantage of a government programme to pay a discounted tax rate by releasing so-called “trapped profits” at two of its subsidiaries.
Trapped profit is profit earned by multinationals after they had been provided with tax incentives to invest in Israel. The Finance Ministry is seeking to give the firms incentives to repatriate some of this profit and generate tax revenue for the government.
One aim is to encourage Israeli companies to distribute a dividend from undistributed profit that is tax exempt.
The deadline to take advantage of the programme, in which companies can receive a 60 percent discount on the taxes they pay, is Monday.
ICL, the world’s sixth-largest potash producer, said its board decided to release all the trapped profits at units Dead Sea Works and Rotem Amfert Negev. As a result, ICL will pay 380 million shekels ($107 million) in taxes.
Israeli companies have an estimated 120 billion shekels of trapped profits.
The Tax Authority has collected some 1.4 billion shekels in taxes from the trapped profits law, well below a target of 3 billion shekels for 2013. As a result, the authority is hoping to convince top companies such as Teva Pharmaceutical Industries and Check Point Software Technologies to release their trapped profits.
Last month, software provider Nice Systems said it had released trapped profits and paid a third-quarter tax expense of $19.2 million. Teva has already released some trapped profit and paid 336 million shekels in taxes.