Israel Encouragement of Knowledge-Intensive Industry (Temporary Order) Law, 5783-2023 (\"Angels Law\")

Mechanism

Four discrete tax instruments bundled into a single temporary-order statute (sunset 31 Dec 2026):

1. Angel tax credit. An individual investing cash in a qualifying Israeli R&D start-up may credit the investment against capital-gains tax — the credit equals the investment amount multiplied by the investor's CGT rate (25-33%). Caps and qualification thresholds tie to PTE / R&D-company status under the Encouragement of Capital Investments Law. 2. Reinvestment deferral. A selling shareholder of an Israeli technological company can defer capital-gains tax on the sale provided proceeds are reinvested in another Israeli start-up within a statutory window — a "rollover" mechanism modelled on the US §1045 QSBS deferral. 3. Five-year acquisition amortisation. Large Israeli technological companies acquiring other Israeli or foreign hi-tech companies may deduct net acquisition cost over five years for corporate-tax purposes — a direct incentive for Israeli tech consolidation and foreign-target absorption. 4. WHT exemption on foreign-financial-institution interest. Interest paid by Israeli high-tech companies to qualifying foreign financial institutions is exempt from Israeli withholding tax, lowering the cost of venture-debt and growth-debt financing.

The package sits alongside the long-standing Preferred Technological Enterprise (PTE) reduced corporate-tax rates (7.5%/12% PTE; 6% Special PTE) and the Innovation Authority grant stack. The Angels Law is the investor-side instrument; PTE is the corporate-side instrument.

Downstream implications

• Sustains the Israeli inward-tech-FDI pipeline — Intel, NVIDIA, Apple

and AMD all run major Israeli R&D centres whose IP-acquisition and M&A economics improve under the five-year amortisation. The 2024-26 semiconductor capex wave (Intel Kiryat Gat fab-38; NVIDIA Yokneam Mellanox successor designs) lands inside the law's effective window.

• Cuts the tax friction on Israeli tech IPO / M&A exits, which had been

identified as a binding constraint on serial founder reinvestment.

• Foreign-debt WHT exemption lowers cost of capital for Israeli growth-

stage tech — relevant given the 2023-25 contraction in domestic venture-debt supply.

• The temporary-order structure means the entire incentive package

expires end-2026 unless extended; renewal politics will be a 2026 watch item alongside the broader Israeli fiscal-consolidation debate driven by post-Oct-2023 defence spending.

Open questions

• Whether the 2025 Economic Arrangements Law or a stand-alone Knesset

bill extends the temporary order beyond 31 Dec 2026.

• Quantitative uptake: number of Angel-credit claims, aggregate

deferred CGT, count of acquisitions amortised under the five-year rule. The Israeli Tax Authority has not published a public dashboard.

• Interaction with the OECD Pillar Two 15% global minimum tax (Israel

enacted Qualified Domestic Minimum Top-up Tax in 2024) — high-tech groups benefiting from PTE preferential rates may have those benefits clawed back at the consolidated-group level.