36 Israeli R&D centers as profit centers for multinational enterprises, which would otherwise require that centers’ operations be recognized as part of enterprises’ net profit.” This clearer framework reduces the risk of reclassification disputes and gives multinationals a more predictable view of their long-term tax exposure in Israel. From a broader policy perspective, Dr. Eran Lempert, head of the Tax Department at Erdinast, Ben Nathan, Toledano & Co. (EBN) suggests these changes are part of a deliberate shift. “Recent developments indicate that the Israeli government is actively replacing areas of ambiguity in its tax regime with greater certainty aligned to international standards,” he says. “The draft regulations published as part of the proposed tax reform seek to codify the preferential treatment historically available to foreign investors, enabling transaction parties to assess tax outcomes upfront rather than relying on tailored – and often difficult to obtain – pre-rulings from the Israel Tax Authority.” He adds that “the ITA’s new R&D circular formalizes transfer-pricing parameters and provides a clearer framework for asset and IP acquisitions, as well as for the structuring and operation of post-transaction R&D centers. Collectively, these measures reduce deal-execution risk, shrink the tax cushion typically built into pricing, and enhance the predictability of post-closing operations for multinational groups.” “Revolutionary for global funds” The reform also targets one of the long-standing friction points for global investors: having to contend with bespoke pre-rulings and complex structures to secure favorable tax treatment. Miri Bickel, head of the Tax Department at Shibolet, explains just how significant this is for venture capital funds, many of which had previously sat on the sidelines: “The reform is revolutionary for global funds,” she points out. “The fixed tax treatment and VAT exemptions eliminate the need for complex structures designed to optimize tax treatment between Israeli and foreign investors, which is a fundamental change that opens the Israeli market to many funds that had previously refrained from investing due to the lengthy and burdensome bureaucratic process. Funds that did not meet the strict pre-ruling criteria or simply did not wish to engage in a process that
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