Company: TSEM
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001178913-25-001537
Chunk: 241

Company: TOWER SEMICONDUCTOR LTD
Filing Date: 2025-04-30
Form: 20-F
Item: Item 10
Chunk 241
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 certain products that are sourced from Israel’s natural resources); income from the sale of semiconductors produced
by other non-related enterprises which use the Preferred Enterprise’s self-developed know-how; income for providing a right to use
the Preferred Enterprise’s know how or software; royalties from the use of the know-how or software which was confirmed by the Head
of the Investment Center to be related to the production activity of the Preferred Enterprise; and services with respect to the aforementioned
sales. In addition, the definition of “ Preferred Income” also includes income from the provision of industrial R& D services
to foreign residents to the extent that the services were approved by the IIA.

A “ Preferred Enterprise” is defined as an Industrial
Enterprise (including, inter alia, an enterprise which provides approved R& D services to foreign residents), which generally more
than 25% of its business income is from export. As mentioned above, these tax incentives no longer depend on minimum qualified investments
nor on foreign ownership.

The Investment Law also determines the conditions and limitations
applying to the tax benefits offered to a “ Special Preferred Enterprise” (as defined below). A “ Special Preferred Enterprise”
will be able to enjoy a corporate income tax rate of 5% if located in a development Zone A and 8% if not located in a development Zone
A.

A “ Special Preferred Enterprise” is defined as a Preferred
Enterprise which meets all of the following conditions, during the relevant tax year: (a) its Preferred Income is equal to or exceeds
NIS 1 billion; (b) the total income of the company which owns the Preferred Enterprise or which operates in the same field of the Preferred
Enterprise and which consolidates in its financial reports the company that owns the Preferred Enterprise equals or exceeds NIS 10 billion;
and (c) its business plan was approved by the authorities as significantly benefitting the Israeli economy according to the Investment
Law provisions.

71

Dividends paid out of income attributed to a Preferred Enterprise
are generally subject to withholding tax at source at a rate of 20% or such a lower rate as may be provided in an applicable tax treaty
(subject to the receipt in advance of a valid certificate from the ITA allowing for such reduced tax rate or an exemption). However, if
such dividends are paid to an Israeli company, no tax will be withheld.

As Tower’s facilities located in Israel qualify as a Preferred
Enterprise, it is entitled to the 7.5% preferred tax