ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the December 2000 issue


A Change in Direction of Government Support of High-Tech Industries

The Chief Scientist in the Ministry of Industry and Trade, Carmel Vernia, plans to institute a new financing model in 2001 for companies receiving government support for research and development. The new model will focus increased support for R&D activities, while decreasing funds used to cover a company's general expenses. As a result, the level of financial support will increase by 20 percent, but since the Chief Scientist's budget has not changed, there will be fewer companies receiving this support.

Under the current arrangement, the Chief Scientist's office can finance up to 17 percent of a developer's salary (including benefits) or grant a 45 percent global reimbursement on administrative costs for selected projects. Mr, Vernia's new plan, drafted together with the Budgets Division of the Finance Ministry, will help a company cover up to 25 percent of a developer's salary, while allowing only a 20 percent reimbursement for general project costs. An interim report with recommendations for revising the R&D Law is now on the desk of Finance Minister Avraham Shochat. The transfer of government-financed R&D outside of Israel when an Israeli firm is acquired by a foreign company, previously not allowed and generally considered by investors as a sticking point, has already been approved. In such instances, the government will be entitled to compensation in keeping with a set formula. The relaxation of this prohibition is intended to encourage companies to apply for R&D support.

Previously, many companies kept from applying for governmental support fearing that it would disqualify them from being acquired by foreign corporations in merger and acquisitions transactions.



Reprinted from the Israel High-Tech & Investment Report December 2000

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