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Law to Encourage and Incentivize Research and Development Passes Knesset
Israel's Knesset Finance Committee approved a new law offering R&D tax credits, enhancing the nation's attractiveness for high-tech companies and investment.
Jerusalem, 15 March, 2026 (TPS-IL) — The Knesset Finance Committee approved today (Sunday) for second and third reading the Law to Encourage and Incentivize Research and Development, as part of the reforms included in the State budget and economic plan for 2026.
The law establishes an updated tax incentive system that will ensure the attractiveness of the State of Israel for investments and business activities of high-tech companies that make a significant contribution to the Israeli economy. According to the law, eligible companies will receive a tax credit on their research and development expenses at rates that increase as R&D expenses increase, in a way that will encourage the companies to increase the scope of their activities in Israel, the scope of employment of technological workers in them, and their investments in Israel: a tax credit of 25% to 30% for companies operating in the periphery or particularly large companies (defined as a special preferential technological enterprise); or at rates of 3% to 4% for other eligible high-tech companies.
The incentive package was formulated in agreement with the Finance Committee and representatives of Israeli industry, and is intended to enhance Israel’s position as one of the most attractive countries in the world for technological activity.
The legislation, alongside high-quality human capital and an innovative and diverse technological ecosystem, will strengthen Israel’s ability to compete in the global technological arena and help ensure that the country continues to be a major destination for the activities of high-tech companies and for attracting new investments in the local knowledge-intensive industry.
