Fiscal & Financial Terms

Israel Petroleum Fiscal System

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This information on petroleum and general taxation arrangements is provided as a guide only and independent legal and/or taxation advice should be sought prior to making any commercial decisions.
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The petroleum fiscal policy - Starting in 2011 a new fiscal regime has been applied by the Israeli government in order to balance between providing economic incentives for investments and maximizing the state's profits from petroleum production.

The main elements of the new fiscal regime are:

Royalties - 12.5%

Profit levy - 0-50%




Taxes and Royalties

Royalties – According to the Petroleum law, 12.5 % from the market value at the wellhead, collected from the beginning of production. The royalties are deductible as expenses for the petroleum profit levy.

 

Petroleum Profit Levy – In 2011 Israel enacted the PETROLEUM PROFITS TAXATION LAW, 5771-2011 which impose a profit levy. The profit levy is applied only after a return of 150% on investment. The levy is progressive; the tax rate increases from 20% to 50%, with the increase in profits. The levy is calculated based on a R Factor type formula, as shown below:  ​

R factor.png

Corporate Income Tax23% in 2018

Total Government Take  -  (includes Royalties, Petroleum Profit Levy & CIT) 52% - 62 %.

 

Other Financial requirements:

Basic License Guarantee

Onshore license holder is required to submit a guarantee of USD 0.5 million for each license.

Offshore license holder is required to submit a guarantee of USD 2.5 million for each license.

It should be noted that the sum may vary between different bid rounds. For example, under the terms of the OBR2, the bidder will be required to provide a guarantee of USD 2.5 million for the first block and USD 0.5 million for each additional block within the Zone.

 

Additional License Guarantee

Prior to drilling, license holders will be required to submit an additional guarantee as follows:

For Onshore license additional USD 0.5 million (minimum)

For Offshore license - USD 5 million (minimum)

The sum may vary according to the level of risk associated with the planned drilling.


Lease Guarantee

For onshore lease, guarantee shall not be less than the USD 1.5 million

For offshore lease guarantee shall not be less than USD 7.5 million. 

 

License/Lease Fees

Each license or lease holder (onshore and offshore) is charged an annual fee based on the size of the plot and the length of the license / lease period. The annual fee varies from USD 10,000 to USD 120,000.

For example, a 400 km² offshore license the annual fee for the first year will be USD 11,500, up to a maximum charge of USD 116,000 in the seventh year of the license. 

 

Insurance

A license or lease holder will have to present insurance in accordance with the type of activity performed and according to the Petroleum Commissioner guidelines.​