WORLD TRADE
ORGANIZATIONG/SCM/N/25/ISR
G/SCM/N/38/ISRG/SCM/N/48/ISR
G/SCM/N/60/ISR
10 October 2000
(00-4146)
Committee on Subsidies and Countervailing Measures Original:  English
SUBSIDIES
New and Full and Updating Notifications Pursuant to Article XVI:1 of the
GATT 1994 and Article 25 of the SCM Agreement
ISRAEL
The following communication, dated 5 October 2000, has been received from the Permanent
Mission of Israel.
_______________
Pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies
and Countervailing Measures, please find enclosed Israel's new and full notification of 1998 (for the
period 1995-1998) as well as updating notifications corresponding to years 1996, 1997, 1998 and
1999.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 2
TABLE OF CONTENTS
Page
SUBSIDIES................................................................................................................ 1
I. INTRO DUCTION ................................................................................................. 3
II. RESEARCH AND DEVELOPMENT.................................................................... 3
1. Research and Development..................................................................................................... ..............3
2. Magnet ....................................................................................................................... ...........................4
3. The Incubators Programme ..................................................................................................... ..............5
4. Beta Sites................................................................................................................... ............................6
5. Feasibility Studies .......................................................................................................... .......................7
III. AID TO SMALL AND MEDI UM-SIZED COMPANIES ..................................... 8
1. Small Business Authority..................................................................................................... .................8
IV. SUPPORT FOR EMPLOY MENT AND TR AINING .......................................... 9
1. Business tutorial programme.................................................................................................. ...............9
2. Introduction of Advanced Managerial Systems .................................................................................. 10
3. On the job training - aimed at aiding the training of new employees at work site ..............................11
4. On-the job training - aiding the retraining or training of new employees who are graduates ofuniversities or graduates of  professional courses ............................................................................. ...............12
5. A grant to newly released soldiers who work in high demand jobs ....................................................136. Enhancement of Human Resources............................................................................................... ......14
V. ENVIRONMENT ................................................................................................ 15
1. Assistance for the financing of investment aimed at the reduction of environmental hazards at
existing industrial plants..................................................................................................... ..............................15
VI. OTHER FORMS OF  SUBSIDIES................................................................... 16
1. The Encouragement of Marketing Fund .......................................................................................... ...16
2. The Encouragement of Capital Investment ...................................................................................... ...18
3. Eilat Free Trade Zone........................................................................................................ ..................19
4. Free Port Zone............................................................................................................... ......................20
5. Cost of Land Development ..................................................................................................... ............21G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 3
I. INTRODUCTION
This notification relates to measures which are currently in force and provides, as far as
possible, statistical information at least up to the end of 1999.  This notification combines Israel’s new
and full notification of 1998 with the 1999 update.
A considerable effort has been undertaken by th e Government of the State of Israel to submit
comprehensive notifications in accordance with the requirements of the Subsidies Agreement.  The
notifications follow, as far as possible, the elemen ts required by Article 25.3 of the Subsidies Agreement
and the new questionnaire.
In accordance with Article 25.7 of the Subsidies Agreement, the fact that a measure has been
notified, does not prejudge either its legal status under GATT 1994 and this Agreement, or the nature of
the measure itself.  Furthermore, this does not co me to imply in any way, that any of the measures
notified, wholly or partly, amounts to a specific subsidy.
II. RESEARCH AND DEVELOPMENT
1. Research and Development
The Authority Responsible for the Subsidy
The Office of the Chief Scientist at the Ministry of Industry and Trade.
Legal basis
The Law for the Encouragement of Industrial Research and Development, 5744-1984.
The purpose of the programme
The purpose of the Law is to encourage and support industrial research and development in
order to foster the development of technology orie nted industry in Israel and to create employment
opportunities for Israel's scientific and technological workforce.
Form of the subsidy
Grants up to 66 per cent of the cost of industrial research.Grants shall be repaid in the form of royalties as a percentage of the total revenues derived from
the sale of the product developed up to the entire amount of the grant, in US$ terms.
To whom the subsidy is provided
The support is provided to projects of research a nd development in all sectors, provided they are
aimed at the discovery of new knowledge for the de velopment of new products or processes or for the
substantial improvement of existing products or processes.
Duration
Ongoing.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 4
Budget/expenditure
Actual annual expenditure
(In thousands US$)
1996:  186,000
1997:  182,000
1998:  174,000
1999:  172,000
Trade effects
The programme finances research and development expenditures, as such it has no effect on
production costs.  The products or procedures fi nanced by the programme are innovators and cannot
therefore compete with existing products.
Therefore, the programme has no effect on trade.
2. Magnet
The Authority Responsible for the Subsidy
The Office of the Chief Scientist at the Ministry of Industry and Trade.
Legal Basis
Regulations of the Director General of  the Ministry of Industry and Trade.
Policy Objective and/or Purpose
The purpose of the subsidy is to encourage the development of innovative generic technologies
which have wide ranging applications in numerous industries.
Academic research institutes participating are en titled to a grant of up to 80 per cent of their
approved budgets. However, since the budget of the academic research institute may not exceed 25 per
cent of the total programme, the maximum overall rate of support is approximately 70 per cent.
To qualify as a Magnet R & D programme, th e project must satisfy the following criteria:
- The technology to be developed is crucial to  maintain the competitiveness of companies;
- The technology cannot be acquired from commer cial sources at competitive prices and
delivery schedules;
- The potential sales are sufficient to economically justify the R & D investments and the costs
of development, manufacturing and marketing of products resulting from the R & D;
- At least two of the participating companies a nd at least one academic institution have formed
and registered a consortium and signed a collaborative agreement.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 5
Form of the Subsidy
Grants calculated as 66 per cent of the approv ed R&D expenses.  See note above concerning
academic research institutes.
To whom the Subsidy is Provided
The subsidy is provided to a consortium of manufacturers and academic institutions.
Budget/Expenditure
Actual annual expenditure(In thousands US$)1996:  36,000
1997:  53,000
1998:  60,000
1999:   59,000
Duration
Ongoing.
Trade Effects
Since the programme is aimed at expanding the technological infrastructure, it has no effect on
trade.
Other information
The subsidy is provided annually during the project's approved duration and it is 66 per cent of
the approved budget of the project. See note above concerning academic research institutes.
3. The Incubators Programme
The Authority Responsible for the Subsidy
The Office of the Chief Scientist at the Ministry of Industry and Trade.
Legal basis
Instructions of the Director General of the Ministry of Industry and Trade.
Policy Objective and/or Purpose
The purpose of the programme is to promote product development projects carried by start-up
companies  which are in need of infrastructure and administrative and managerial guidance.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 6
Form of the Subsidy
Under the incubator programme, the grant is  given for a maximum period of two years as
85 per cent of the  R & D expenses up to a maximum of $140,000 (in 1999) per year, but the actualgrant is substantially lower, and in fact the benefit is almost nil because, if the project is successful,
the grant must be fully repaid in the form of royalties to the Government of Israel.
To Whom the Subsidy is Provided
The subsidy is provided to start-up companies which were selected by the Incubators
programme management and approved by a steering committee for the Incubators Programme.
Budget/Expenditure
1. (In thousands US$)
 1996:    30,000
1997:    30,000
1998:    30,000
1999:    29,000
Duration
Ongoing.
Trade effects
In light of the scope and nature of the R&T activity being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
Other information
This programme has proved itself as one of the most efficient and productive employment
creating opportunities for scientists.  The management of the programme has set itself, as a primarytarget, to aid the scientists and inventors among the new immigrants who arrived in Israel in the last
few years.
Statistics show that at least 50 per cent of those supported by this programme are new
immigrants.
4. Beta Sites
The Authority Responsible for the Subsidy
The Office of the Chief Scientist at the Ministry of Industry and Trade
Legal Basis
Instructions of the Director General of the Ministry of Trade and IndustryG/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 7
Policy Objective and/or Purpose
The purpose of the progis to enable plants that have completed the research and development
stage for a new product, to produce a prototype which will allow  potential customers to supply
technical feedback and suggestions for modifications of product features and specifications.
Form of the Subsidy
Grant of 50 per cent of approved expenditures to companies with a turnover of up to
US$ 6 million for the previous three years up to $600,000 for a 30 month period.
Companies with a turnover of up to US$ 30 million for the previous three years will receive
up to 30 per cent of approved expenditures subject to the ceiling mentioned.
If the project is successful, the grant must be repaid in the form of royalties to the
Government of Israel.
Budget/Expenditure
Actual annual expenditure:
(In thousands US$)
1996:    4,740
1997:    5,105
1998:    3,6951999:    4,820
Duration
Ongoing
Trade Effects
It is not possible to estimate what, if any, trade effects may result from the use of this
programme.
5. Feasibility Studies
The Authority Responsible for the Subsidy
The Office of the Chief Scientist at the Ministry of Industry and Trade
Legal Basis
Instructions of the Director General of the Ministry of Trade and IndustryG/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 8
Policy Objective and/or Purpose
The purpose of the program is to enable companies to prepare surveys to evaluate the market
feasibility of a product prior to investing large sums in either research or manufacturing, usually priorto the research and development stage.
Form of the Subsidy
Grant of up to 50 per cent for non start-up company and up to  66% for start-up company with
a maximum budget of US$ 25,000 and US$ 30,000 for survey involving more than two continents.
If the project is successful, the grant must be repaid in the form of royalties to the
Government of Israel.
To Whom the Subsidy is Granted
In cases in which the Chief Scientist’s Office believes a feasibility study is required in order
to evaluate the project of firms eligible for the research and development grant.
Budget/Expenditure
(In thousands US$)1997:    10.2
1998:    390
Duration
Ongoing
Trade Effects
It is not possible to estimate what, if any, trade effects may result from the use of this
programme.
III. AID TO SMALL AND MEDIUM-SIZED COMPANIES
1. Small Business Authority
The Authority Responsible for the Subsidy
The Small Business Authority of Israel
Policy Objective and/or Purpose
The purpose of the programme is to aid owners and entrepreneurs of small businesses in
establishing, managing and expanding their business.
Form of the Subsidy
State loan guaranteeG/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 9
To Whom the Subsidy is Provided
The Small Business Authority of Israel initia tes the establishment of SBCDs (Small Business
Development Centres) and supports them by provid ing professional guidance and assistance.  These
centres are meant to serve as a central address for small businesses owners and entrepreneurs planning
new businesses.  They are designed as "one-st op shop" which respond to a variety of this group's
business management needs.  The centres also arra nge for government bank guarantees for loans to
small businesses so that banks will not refrain from giving loans to small businesses because of
insufficient collateral. The credit limit for a single business is NIS 500,00 ($160,000).  The loan is given
for a period of up to five years for the purchase of equipment or one year for operating capital.
No overall legal definition exists for a small bus iness.  However, the definition in practice used
by the Small Business Authority is a business with up to 70 employees and an annual turnover of up to
$5 million.
Annual Amount Budgeted
(In thousands of shekels)
1996:   11,406
1997:   12,158
1998:   12,627
Duration
Ongoing.
Trade Effects
It is not possible to calculate the trade consequences as it is a general support scheme and not
support to specific enterprises.
Other Information
The Authority was established in 1994, following a recommendation by the Public Committee
to encourage small businesses.  The Small Busine ss Authority is an autonomous, non-profit organization
which is being financed by the Israeli Government.
IV. SUPPORT FOR EMPLOYMENT AND TRAINING
1. Business tutorial programme
The Authority Responsible for the Subsidy
The Finance Administration at the Ministry of Trade and Industry
Legal Basis
Instructions issued by a Ministerial Steering committee.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 10
Policy Objective and/or Purpose
The purpose of the programme is to supply small- and medium-sized businesses in
disadvantaged areas and areas affected by unemploymen t, with managerial tutoring, in order to enhance
their management and performance.
Form of Subsidy
Grant amounting to 75 per cent of the expenses of the tutorial programme.
To whom the subsidy is granted.
Enterprises with up to 100 employees are eligible to apply. Applications are submitted to a
regional project coordinator, who examines the ente rprise.  If the coordinator determines that the
enterprise is likely to gain from the programm e, a tutor will be assigned to the project.
Annual Amount Budgeted
1996:   NIS 11,209,257
1997:   NIS 13,103,599
1998:   NIS 13,311,3681999:   NIS 14,217,034
Duration
Ongoing.
Trade effects
The programme aids small- and medium-sized businesses in disadvantaged areas to improve
employment opportunities and wages, by the enhancement of their management.
Therefore, the programme has no trade effects.
Other information
The duration of the payment of the tutorial pr ogramme is between 6-12 months, but shall not
exceed 150 hours of consultancy.
2. Introduction of Advanced Managerial Systems
The Authority Responsible for the Subsidy
The Finance Administration at the Ministry of Industry and Trade.
Legal Basis
Instructions of the Director General of the Ministry of Industry and Trade.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 11
Policy Objective and/or Purpose
The purpose of the programme is to assist me dium-sized manufacturers to adopt innovative
managerial systems.  This purpose is to be achieved by encouraging the use of advanced quality controltechnologies and/or the adoption of international standardization processes of industrial quality
management.
Form of the Subsidy
Grants.
To Whom the Subsidy is Provided
The subsidy is provided to medium-sized manufacturers.
Annual Amount Budgeted
(in millions of shekels)1996:  NIS 2.4
1997:  NIS 2.41998:  NIS 2.4
1999:  NIS 2.4
Duration
Ongoing.
Trade effects
None.
Other information
The subsidy consists of the payment of 50 per cent of the consultancy fees, up to a ceiling of
400 hours of consultancy.
3. On the job training - aimed at aiding the training of new employees at work site
The Authority Responsible for the Subsidy
Manpower Training and Developmen t Bureau of the Ministry of  Labour and  Social Affairs
Legal Basis
Criteria determined by an interministerial committee.
Policy Objective and/or Purpose
The purpose of the programme is to encourage em ployers to hire new employees, despite their
relatively low productivity rate during the initial period of employment.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 12
Form of the Subsidy
Participation in the employer’s  work allowances to the employee
To Whom the Subsidy is Provided
The subsidy is provided by the Manpower Traini ng and Development Bureau of the Ministry of
Labour and Welfare to any employer who hires  ne w employees that meet the necessary requirements.
Subsidy per Employee
1996-1997  up to NIS 850 per month.
1998-1999  up to NIS 1000 per month.
Duration
Ongoing.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
programme.
Other  Relevant Information
The subsidy is given during the first three working months of the new employee.The subsidy commences on the date on which the new employee begins working, but not earlier
than the date of the application for the subsidy by the employer.
4. On-the job training - aiding the retraining or training of new employees who are
graduates of universities or graduates of  professional courses
The Authority Responsible for the Subsidy
Manpower Trand Development Bureau of the Ministry of Labour and Social Affairs
Legal basis
Criteria determined by an interministerial committee.
Policy Objective and/or Purpose
The purpose of the programme is to encourag e employers to employ professional workers,
graduates of universities or of courses who lack wo rk experience , thereby en abling them to gain the
necessary experience.
Form of the Subsidy
Grants.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 13
To Whom the Subsidy is Provided
The subsidy is provided by the Manpower Traini ng and Development Bureau of the Ministry of
Labour and Social Affairs to employers who hire employees that meet  the necessary criteria .
Subsidy Per Employee
1996-1997 up to NIS 850 per month
1998-1999 up to NIS 1000 per month.
Duration
The programme was phased out in 1999. As of 2000 th e program is no longer administered as a
grant subsidy to the employers but rather the Nationa l Security Institute pays an allowance directly to
the employee.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
programme.
Other Relevant Information
The subsidy is given for a period from the first month up to six months of the employee’s new
work.
The subsidy period commences on the date on which the new employee begins working but not
earlier than the date of the application for the subsidy.
5. A grant to newly released soldiers who work in high demand jobs
The Authority Responsible for the Subsidy
The Employment Service and the National Insurance Institute.
Legal Basis
The National Insurance Law- 1968
Policy Objective and/or Purpose
The purpose of the programme is two-fold:
1. To motivate young people after the completion of  their compulsory military service, to accept
employment rather than to receive unemployment benefits.
2. To encourage unskilled newly released soldiers labour to join sectors in which unskilled labour
is in high demand, such as in industry, agriculture, construction and tourism.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 14
Form of the Subsidy
Grant.
Subsidy per employee
1997:   NIS 5,570
1998:   NIS 6,188
1999:   NIS 6,603
Duration
Ongoing.
Trade Effects
Considering its limited application, low budget and limited economic effect, this programme
has no effect on trade.
Other Relevant Information
The payment of the subsidy to the employee is made after he/she has completed six months of
work in a high demand job.
The employee is entitled to the subsidy only if  he/she commences working not later than
12 months after his/her completion of compulsory military service.
6. Enhancement of Human Resources
The Authority Responsible for the Subsidy
The Ministry of Industry and Trade
Legal Basis
Instructions of the Director General of the Ministry of Industry and Trade
Policy Objective and/or Purpose
The purpose of the programme is to encourage the enhancement and upgrading of human
resources and to promote cooperation and interaction between industry and institutions of learning.
Form of Subsidy
Grants
To Whom the Subsidy is Provided
Industrial plants located in development areas are entitled to partial refunding of the costs of
training employees or potential employees at all levels.  Eligible plants  are also entitled to partialG/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 15
refunding of 50 per cent up to 50 hours of professional counselling in the determination of training
needs for the plant.
Annual Amount Budgeted
1998  NIS 29,284,000
1999  NIS 42,619,000
Duration
The programme was established  at the end of 1997 and will continue on an on-going basis.
Trade Effects
None
Other  Relevant Information
The plants that have received grants have been from various industrial sectors.
The rate of the refund to the industry for the training of employees is determined by the size
of the plant.
V. ENVIRONMENT
1. Assistance for the financing of investment aimed at the reduction of environmental
hazards at existing industrial plants
The Authority Responsible for the Subsidy
The Ministry of Environment.
Legal Basis
Written criteria and instructions issued by the Di rector General of the Ministry of Environment.
Policy Objective and/or   Purpose
The purpose of the subsidy was to provide financ ial aid to existing industrial plants for the
installation of contamination prevention or reducti on systems and/or system s handling factory outputs
causing environmental hazards in order to comp ly with environmental legislative requirements.
Form of the Subsidy
Grant up to 35 per cent of the cost of the appr oved investment for the new installation, but not
more than NIS 1.125 million (the lowest of the two).
Annual Amount Budgeted
1995-1998 NIS 28,000,000.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 16
Duration
The programme was discontinued in 1999.
Trade Effects
This programme solely supported the elimination or reduction of environmental hazards created
by factories from all types of industries.
Therefore the programme was neutral in terms of competition and had no effect on competition
in international trade.
Other Information
Payment of the grant was made to the plant following the receipt of a confirmation from a
consultant, that the programme had been fully impl emented in accordance with the Ministry's terms of
approval.
VI. OTHER FORMS OF SUBSIDIES
1. The Encouragement of Marketing Fund
The Authority Responsible for the Subsidy
The Finance Administration at the Ministry of Industry and Trade.
Legal Basis
Instructions  of the Director General of the Ministry of Industry and Trade.
Policy Objective and/or Purpose
The purpose of the programme is to encourage exporters to adopt advanced marketing
strategies, to use advanced marketing tools and to assist them in building a marketing infrastructure.
Form of the Subsidy
Grant of 30 per cent on approved infrastructural marketing expenditure, up to a ceiling of
US$300,000.  Infrastructural marketing expenditures re fer to marketing activities which do not include
current expenditure linked to the export activity nor to the volume of goods exported but rather support
for participating in trade fairs and professional seminars, market studies and consultancy for the
preparation of business plans, preparation of catalogues, etc.
To Whom Subsidy is Provided
The subsidy is provided to exporters of all sect ors intending to build and/or strengthen their
marketing infrastructure abroad and who have conso lidated a strategic marketing plan for that purpose.
Companies programs are assessed after a ri gorous level of commercial evaluation.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 17
Annual Amount Budgeted (in millions of NIS)
1996:   NIS  75
1997:   NIS 1101998:   NIS  115
1999:   NIS 160
Duration
Ongoing.
Statistical Data
(Total exports in millions of US$)
Export 1996:  US $20,610
Export 1997:  US $22,591
Export 1998:  US $23,417
Export 1999:  US $25,793
Trade Effects
The amounts granted are so insignificant that we are unable to confirm the existence of a direct
relation between the granting of this aid and the trend in export.
Other Information
The grant is repaid by the exporters in the form of  royalties at a rate of 4 per cent interest of the
growth of exports, whether a direct link between th e granting of the support and the growth of exports,
exists or not.
The Import Liberalization Fund
The Authority Responsible for the Subsidy
The Finance Administration at the Ministry of Industry and Trade.
Legal Basis
Instructions of the Director General of the Ministry of Industry and Trade.
Policy Objective and/or Purpose
The purpose of the programme is to assist industrial enterprises to adjust to increased
competition resulting from Israel's import liberaliza tion programme, which unilaterally reduces custom
rates.
Form of the Subsidy
Grants or state guaranteed loans.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 18
To Whom the Subsidy is Provided
The subsidy is provided to manufacturers prov ed to have been affected by the import
liberalization and who are able to present a business rehabilitation plan.
Amount Budgeted
1994-2000:  NIS 45,000,000
Duration
Started in 1992 after the entry into force of the Liberalization Programme.  The programme is
intended to be abolished at the end of 2000.
Trade Effects
The programme aids businesses injured by Israel's unilateral reduction of customs rates.The only possible trade effects of the progra mme are increased imports, resulting from the
implementation of the unilateral liberalization programme which was facilitated by the operation of the
Import Liberalization Fund.
Therefore, this programme has no effect on trade.
2. The Encouragement of Capital Investment
The Authority Responsible for the Subsidy
The Investment Centre at the Ministry of Industry and Trade.
Legal Basis
The Law for the Encouragement of Capital Investment -1959
Policy Objective and/or Purpose
The purpose of the programme is to expand the economy's production capacity, to absorb
immigration, to create new sources of employment a nd to encourage the dispersion of the population to
disadvantaged areas (development areas).
Development areas are redefined at pluriannual intervals, on the basis of indicators (such as,
unemployment, level of income, etc.) and subject to th e approval by the Knesset (the Israeli Parliament).
Form of the Subsidy
The support given under this programme is in the form of grants and/or reduced rates of
taxation.
Grants of up to 24 per cent of the approved capita l investment are given to approved enterprises
located in disadvantaged areas.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 19
To Whom the Subsidy is Provided
Subsides under this programme are provided to all industrial sectors, including: food,
refrigerators, textiles, clothing, leather, wood and wood products, paper, printing and cartons, plastics
and rubber, chemical, pharmaceuticals and paints, me tals, electronics including software and energy,
ceramics and glass.
Annual Amount Budgeted
1997: NIS 1,399,705,000
1998: NIS 1,406,863,0001999: NIS 1,372,668,000
Duration
Ongoing.
Trade Effects
The specific assistance under this programme is gr anted to enterprises located in disadvantaged
areas, in order to offset local investment disadvan tages and raise the levels of income and employment
in structurally weak areas.
Therefore the programme is neutral in terms of competition and has no effect on competition in
international trade.
3. Eilat Free Trade Zone
Authority responsible for the subsidy
The Ministry of Finance
Legal Basis
Eilat Free Trade Zone Law -1985
Purpose of the programme
The purpose of the programme is to encourage the development of the city of Eilat, located at
Israel’s most Southern border.
Form of the subsidy
Several types of tax concessions:Most products (imported or domestically produced) purchased in Eilat are exempt from
value-added tax.  This tax benefit is available to Eilat residents and companies, for products consumed
in Eilat.G/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
Page 20
Employers receive tax refunds for employees of up to 20 per cent of gross wages paid to
employees.  Resident individuals receive tax credits of up to 10 per cent of their taxable income from
employment in Eilat.
To whom the subsidy is provided
The tax concessions are granted to Eilat residents  and companies located in Eilat.
Budget/Expenditure
Data not available
Trade Effects
It is not possible to estimate what, if any, trade effects may result from the use of this
programme.
4. Free Port Zone
Authority responsible for the subsidy
Ministry of Finance and Ministry of Transportation
Legal Basis
Free Port Zone Law -1969
Purpose of the programme
The objective is to promote the development of the port city of  Eilat at Israel’s most Southern
border.
To Whom the Subsidy Is Granted
Enterprises located in the Free Port Zone of Eilat
Form of the subsidy
Various forms of tax incentives including, inter alia:
(1) exemption from income taxes for seven years, and thereafter to a maximum tax rate of 30 per
cent,
(2) a tax of 15 per cent (compared with the usual tax rate of 36% on dividends paid out of the
above income with no stipulated time limit;
(3) no capital gains tax on inflationary gains, and no capital tax to foreign shareholders on selling
their share in the enterprise, when the shares are purchased in foreign currency;  and
(4) exemption from property taxG/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
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Budget/Expenditure
Data not available.
Trade Effects
It is not possible to estimate what, if any, trade effects may result from the use of this
programme.
5. Cost of Land Development
The Authority Responsible for the Subsidy
Ministry of Trade and Industry and Trade
Legal Basis
Instructions of the Director-General of the Ministry of Industry and Trade
Policy Objective and/or Purpose
Participation in the cost of land development in industrial areas in  the disadvantaged regions
in accordance with the Law of Encouragement of Investment Capital as a means of encouraging
enterprises to locate in those areas. Land development includes dirt work, access roads, sewers, lights
and phone lines and water pipes.
To whom the subsidy is provided
New enterprises, upon receipt of  approval from the  authority responsible for the subsidy,
establishing their industries  in the disadvantaged regions in accordance with the Law of
Encouragement of Investment Capital.
Form of Subsidy
Participation in the cost of land development up to 70 per cent of the cost depending on the
particular part of the country in which the development takes place.
Budget/Expenditure
(In thousands Israeli shekels)1997:   NIS 148,000
1998:   NIS 140,0001999:   NIS 118,134
Duration
OngoingG/SCM/N/25/ISR, G/SCM/N/38/ISR,
G/SCM/N/48/ISR, G/SCM/N/60/ISR
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Trade Effects
It is not possible to estimate what, if any, trade effects may result from the use of this
programme.
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