Israel is introducing a tax reform intended to reverse the tech brain drain and encourage local and foreign fund investments in the high-tech sector, as the country seeks to catalyze the economy’s largest and fastest growth engine following the two-year war with the Hamas terror group.

The Finance Ministry, together with the Israel Tax Authority and the Israel Innovation Authority, on Sunday presented a set of tax benefits for investors in Israeli high-tech companies, as well as regulatory incentives for acquiring or merging with startups.

The reform is intended to provide tax certainty for multinational companies, remove investment barriers for foreign investors, incentivize a rapid return of Israeli entrepreneurs and high-skilled tech workers from abroad, and foster growth of the Israeli high-tech industry.

“Israel is already one of the most attractive countries in the world for high-tech investment, due to its tax rates and high-quality human capital,” said Finance Minister Bezalel Smotrich. “From now on, it will also be a country known for the simplicity of its tax processes and its regulatory certainty.”

“We understand that Israeli founders and entrepreneurs need to be close to their customers and are relocating, but with the end of the war, we are calling on Israelis to return home and are preparing an environment so that they will not think twice about whether it is worthwhile,” said Smotrich.

Israel is ranked as the fifth-largest hub in the world for startup fundraising after San Francisco, New York, London, and Boston. However, investments in Israeli startups this year continue to be concentrated in two sectors — cybersecurity and enterprise software — signaling a lack of dispersion across new technology areas and a decline in........

© The Times of Israel