Company: TSEM
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001178913-25-001537
Chunk: 111

Company: TOWER SEMICONDUCTOR LTD
Filing Date: 2025-04-30
Form: 20-F
Item: Item 3
Chunk 111
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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 rate described above with respect to its Preferred Income, and therefore, applies
a 7.5% tax rate in determining its Israeli current tax provision, deferred tax assets and liabilities. Any portion of Tower’s taxable
income that is not eligible for Preferred Enterprise benefits, if at all, is to be taxed at the Israeli statutory corporate tax rate of
23%.

Tax benefits under the 2017 Amendment

An amendment to the Investment Law was enacted as part of the Economic
Efficiency Law that was published on December 29, 2016, and became effective as of January 1, 201