MOFET – R&D in the Manufacturing Industry

The manufacturing industry struggles to cope with increasing global competition. The Innovation Authority provides a variety of incentives designed especially to meet these sectors’ needs and to encourage innovation in them.

To encourage export-focused enterprises to promote and implement innovative technological processes, by implementing R&D programs aimed at the development of innovative products, improvement of existing products or the development and improvement of manufacturing processes with the objective to enhance productivity and create technological differentiation that will achieve competitive advantages in the local and global markets.

• A corporation or industrial factory that was incorporated in Israel and that meets one of the following conditions:
  1. At least 50% of its revenues in the previous year stems from industrial manufacturing in the technology sectors:
     • Traditional, such as: food, beverages, tobacco, textiles, clothing, leather, wood products, paperproducts, printing
     • Mixed-traditional sectors such as: rubber, plastics, metals, ceramics, building materials.
  2. At least 50% of its revenues in the previous year stems from industrial manufacturing in the technology sectors:
     • Mixed-high-tech sectors such as: chemicals, cosmetics, arms and ammunition, electric equipment, manufacture of machines and motor vehicles, and medical, dental and orthopedic equipment;
     • High-tech, such as: pharmaceuticals, computers, electronic equipment, optic equipment, aircraft and spacecraft manufacture.
• For a corporation meeting both these criteria:
  • The number of manufacturing personnel is at least 30% of its total employees, but not less than three workers.
  • The number of R&D employees is no more than 10% of its total employees, but not more than 25 workers.
• Companies that wish to determine whether their activities qualify for participation in this incentive program can apply to the Authority, requesting it to carry out a preliminary examination regarding their affiliation to the traditional industrial sectors.

• Support of between 30%-50% of R&D expenses of the approved programs: An increment of 10% for R&D projects in Area  ‘A’ Development Regions and an increment of 10% if at least 30% of the project’s authorized budget is implemented in a recognized research institute.
• Recognition of unique R&D expenses for all companies meeting the program’s conditions such as:
  • Expenses for the development of molds that will be later incorporated into the company’s production line, with a budget up to NIS 500,000.
  • Direct expenses for the development of unique production machinery and the construction of these machines’ prototype with a budget up to NIS 500,000.
  • Expenses for the acquisition of knowledge that constitutes an integral part of the R&D program with a budget up to NIS 250,000.
  • Expenses for product commercialization and marketing activities, of up to 15% of the approved budget plan.
• Special benefits for the first 3 R&D projects submitted by companies that manufacture in Israel:
  • Exemption from paying royalties (for requests submitted until 31.12.2020).
  • The level of support for authorized R&D programs will stand at 50% of the approved budget.

Following the period of exemption from royalties payments, these companies (except high-tech industrial manufacturing companies) will be eligible for a decreased rate of royalties payment of 1.3%.

Clarification: High-tech industrial manufacturing companies, as defined above, are not eligible for a discount in their royalty payments.

Favorable and customized terms: This incentive program offers all low-tech enterprises preferential terms adjusted to their needs, in order to implement development programs for future products and innovative technologies that will provide the companies with a competitive advantage and allow them to penetrate new markets.

Benefits to companies just starting their R&D activities and that manufacture in Israel: This incentive program offers particularly beneficial conditions and exemption from paying royalties to companies that are at the beginning of their R&D activities and manufacture their products in Israel, in order to facilitate strategic decision-making to enter into and carry out an R&D program (subject to the approval of the Authority Council).