Israel Plans to Incentivize R&D in Energy Through Taxation
Israel's Ministry of Energy suggests tax incentives, including adjusting investment tax credits, to support energy R&D companies in their commercialization.
Jerusalem, 18 May, 2026 (TPS-IL) — Israel’s Ministry of Energy and Infrastructure published a new policy report containing recommendations for the adoption and implementation of government taxation tools that it said will help Israeli energy R&D companies in advanced growth stages deal with one of the key barriers to the industry’s growth – the transition from a technological development phase to the commercialization phase.
The report focuses on two main recommendations. The first deals with adjusting the investment tax credit (ITC) mechanism currently implemented in Israel under the Knowledge-Intensive Industry Encouragement Law, which is expected to expire at the end of 2026. This deadline creates an opportunity to examine the adjustment of the eligibility conditions for the benefit, so that they better reflect the unique characteristics of energy R&D companies and allow them to benefit from this tool at a critical stage in their development.
he RTC benefit used worldwide is a tax credit that turns into a grant. Israel joined, starting at the end of 2025, the OECD’s “PILLAR II” reform, under which the profits of large multinational companies are subject to a minimum tax of 15%. As part of this program, and with the aim of enabling countries to maintain attractive conditions for companies, countries are allowed to apply RTC-type benefits, but they must meet certain rules (benefits that meet the conditions are called QRTC). In March 2026, the QRTC incentive was added to the Israeli law book and part of the tax system.
The report recommends examining the possibility of expanding the benefit, so that it would allow support for growth companies in the commercial demonstration stage, which have significant capital expenditures, but do not meet the criteria in the law.
