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Microsoft plans to invest over $1 billion to expand its activities in Israel

Israel offers Microsoft tax rate of just 6% compared to regular corporate tax rate of 23% 

Microsoft offices in Israel (Photo: Microsoft)

The American software giant Microsoft is reportedly planning to invest more than $1 billion in Israel, according to the leading Israeli business paper, Globes.

Without elaborating on how it got the information, Globes claims that Microsoft CEO Satya Nadella informed Prime Minister Benjamin Netanyahu during a conversation earlier in March about the corporation’s planned new large investments in the Jewish state to the tune of $1 billion to $1.5 billion. Nadella had reportedly told Netanyahu that Israel is “a very important development center for Microsoft.”

Microsoft’s more immediate plans include setting up a data center in Israel during 2021. The American corporation is also considering expanding its chips development and R&D activities in Israel. Microsoft already enjoys an attractive tax rate of just 6% on profits from its IP in Israel. By comparison, regular corporate tax in Israel is 23%. 

Over the years, Microsoft’s presence in Israel has grown due to ample access to world-class Israeli engineers and favorable tax conditions. By the end of 2020, Microsoft employed approximately 2,300 people in Israel. While Microsoft has various production and distribution centers worldwide, the vast majority of personnel in Israel deals with R&D. The focus is on cutting-edge technologies, such as cybersecurity, artificial intelligence and big data.

Microsoft Israel is currently concentrated in four cities: Tel Aviv, Haifa, Herzliya and Nazareth. In November, the company opened its new 495,000-square foot Microsoft Israel campus in the coastal town Herzliya, close to Tel Aviv. 

Known as the Silicon Wadi, the Jewish state has emerged as the place with one of the highest concentrations of high-tech companies in the world outside of Silicon Valley in California. While much of the high-tech industry is concentrated around Tel Aviv and along Israel’s Mediterranean coast, high-technological companies have also spread to Jerusalem, Beersheva and other parts of Israel.

The Israeli self-driving car technology giant Mobileye, for instance, is located in Jerusalem. In 2017, U.S. tech giant Intel bought Mobileye for $15.3 billion, making it one of the largest business deals involving an Israeli company. The southern Israeli city Beersheva, which is associated with the patriarch Abraham, has emerged as a leading global cyber technology center in recent years. Despite its tiny size, Israel is among the countries with the largest number of companies listed on the U.S. NASDAQ stock exchange. 

While most Israeli companies are small and medium-sized start-ups, Israel has attracted some of the largest international players from the global tech industry, such as Microsoft, Intel and Google.  

Google recently announced that it would set up a new chip design team in Israel led by Uri Frank as its new VP of engineering. Frank is an extremely experienced Israeli tech expert, who was recruited from Intel recently. 

Amin Vahdat, a Google fellow and vice president of systems infrastructure, was confident that Frank “will help us build a world-class team in Israel.”

Vahdat stressed Israel’s disproportionate importance in the global high-tech industry. 

“We’ve long looked to Israel for novel technologies, including Waze, Call Screen, flood forecasting, high-impact features in Search and Velostrata cloud migration tools, and we look forward to growing our presence in this global innovation hub,” said Vahdat. 

The All Israel News Staff is a team of journalists in Israel.

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