IT business systems company Amdocs Ltd. (Nasdaq: DOX) is in talks with the Israel Tax Authority about transferring the company’s intellectual property to Israel in exchange for tax benefits worth billions of shekels, sources inform “Globes.”
The tax benefits that Amdocs will receive are anchored in Israel’s Encouragement of Capital Investments Law and include a tax rate of just 6%. Corporation tax in Israel is 23% but Amdocs has paid a far lower rate in Israel for many years under the same Law.
“Globes” has learned that Amdocs has sought a pre-ruling from the Israel Tax Authority on the tax rate it would pay for transferring its IP to Israel and to discover what disputes are likely to arise. Among the issues that Amdocs wishes to clarify is the value of purchasing the IP from companies in the Amdocs Group overseas, for the purpose of transferring it to Israel.
Amdocs specializes in telcom billing services and managing CRM systems and its customers include major international players like T-Mobile, Vodafone, SingTel and MGM. Amdocs has developed systems enabling these companies to move operations to the cloud and enjoy 5G infrastructures with a quality user experience.
Amdocs operates in 85 countries and has 350 customers. The company has 26,000 employees including 20% of them in Israel with offices in Ra’anana, Nazareth and Sderot. The company has development centers in Israel, the US, India, Cyprus and Brazil. Amdocs is currently building a new innovation campus in Ra’anana at a cost of NIS 350 million, with construction due to be completed next year. Revenue in 2020 was $4.2 billion and the company is traded on Nasdaq with a market cap of nearly $11 billion.
Amdocs is exactly the type of company that the state and the Israel Tax Authority were targeting when enacting the Encouragement of Capital Investments Law and its tax incentives for exporters whose assets are based on IP, such as software systems.
Shekel & Co. Law Office senior partner Adv Yaniv Shekel, who specializes in tax matters said, “A group the size of Amdocs can expect tax of 6% for profits resulting from IP (compared with 23% corporation tax).
Adv. Shekel adds that there is also tax relief in distributing dividends. “Due to these benefits, it has been frequently worthwhile for companies operating outside of Israel not to pay tax on it here but in foreign countries, while transferring their IP to Israel and paying reduced tax on their profits.”
Amdocs declined to comment on this report.
The Israel Tax Authority said, “We are unable to comment due to the Law’s obligation of confidentiality.”
Published by Globes, Israel business news – en.globes.co.il – on March 16, 2021
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