Organisation for Economic Co-operation and Development

ISRAEL: GENERAL METADATA Data documentation General notes Israel’s fiscal year coincides with the calendar year. Producer Support Estimate The oil and gas industry in Israel is regulated by a system of fees, royalty payments and tax deductions developed in the 1950s. The fiscal provisions that are unique to the oil and gas industry are the Oil Law (1952), Oil Regulations (1953), Income Tax Ordinance (1961) and some parts of the income tax legislation, especially the Deductions from the Income of Holders of Oil Rights (1956) and the Rules for Calculating Tax for the Holding and Sale of Participation Units in an Oil Exploration Partnership (1988). Israel started producing natural gas in 2004. As this is a relatively recent development, the issues of producer taxation and royalty payments are currently under review by the government (Knesset), the Ministry of Finance and participants representing the civil society. In April 2010, the Minister of Finance appointed a committee to examine the fiscal framework for the oil and gas resources in Israel, headed by Professor Eytan Sheshinski. The Sheshinski Committee submitted its final conclusions in January 2011. It recommended that the 12.5% rate of royalty payments should remain unchanged since increasing it could have a negative impact on the development of relatively less profitable gas fields. The depletion deduction, however, should be cancelled as it leads to a considerable reduction of the amount of taxable income which has no economic justification, the Committee concluded. The Committee also instituted a progressive oil and gas levy on profits. The initial rate of the levy is 20%, but it will not be collected before quotient of net cumulative revenues divided by the exploration and development expenses reaches or bypasses 1.5. When this quotient exceeds 2.3, the levy will gradually increase to 50%. Since production from the Tamar field began in 2013, it is projected that the government will only begin collecting revenue from the designated levy in 2018. In addition, as per income tax calculations, costs that accumulated during the lease stage of the oil-and-gas-asset development will be awarded accelerated depreciation at a rate of 10%. Investments made by the end of 2013 were given a maximum of amount of accelerated depreciation rate of 15%.