The Interim Report Of The Committee On Promotion Of Publicly Traded Infrastructure Investment Funds

Author:Ms Anat Shavit and Yuval Peled
Profession:Fischer Behar Chen Well Orion & Co

On May 4, 2014, an inter-ministerial committee was set up to promote the establishment of publicly traded funds for investment in infrastructure. The committee was formed to examine and recommend measures and actions that would encourage the establishment of traded infrastructure funds in order to increase the availability of financing sources for infrastructure projects, reduce their costs of finances and enable small investors to directly participate and own these projects. To that end, the committee has recommended, amongst others, certain tax benefits and restrictions as outlined below.

Founders and investors should consult with an Israeli tax specialist when contemplating the formation of or investment in such traded infrastructure fund.

The Tax and Corporate Governance Model. The committee generally recommends adopting a real estate investment trusts (REIT) based model whereby there is only one level of taxation - taxation of the fund's shareholders, notwithstanding the fact that the fund shall be formed as an Israeli corporation. The classification and calculation of the fund's income, however, will be determined at the fund's level. The proposed corporate governance model of the fund is also based on the REIT model, i.e., a fund with no controlling shareholder, applying the "5 or fewer" rule which limits the aggregate holdings of the 5 largest shareholders to less...

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