Teva releases "trapped profit", to pay $565 mln in Israeli taxes

Reuters

JERUSALEM, Nov 11 (Reuters) - Teva Pharmaceutical Industries will pay 2 billion shekels ($565 million) to Israel'sgovernment as part of a programme to release so-called trappedprofit in exchange for a steep discount on its tax bill, thecompany said on Monday.

Trapped profit is profit earned by multinationals after theyhad been provided with tax breaks to invest in Israel. TheFinance Ministry is seeking to give the firms incentives torepatriate some of this profit and generate tax revenue for thegovernment.

In all, Teva will hand over 2.84 billion shekels tothe state, a sum that also includes 840 million shekels tosettle tax assessments from 2005 to 2011 as well as a payment of336 million shekels it paid in May when it released some trappedprofit.

According to Finance Minister Yair Lapid, Teva released 33billion shekels in trapped profit.

State coffers will collect about 3.6 billion shekels thisyear in taxes on trapped profit from various Israeli companies,according to the tax authority.

Teva, the world's largest generic drugmaker by sales, saidit would incur a charge of $235 million, which would be reportedin fourth-quarter adjusted results.

Israeli companies have an estimated 120 billion shekels oftrapped profit.

One aim of the government scheme is to encourage Israelicompanies to distribute a dividend from undistributed profitthat is tax exempt.

The deadline to take advantage of the programme, in whichcompanies can receive a 60 percent discount on the taxes theypay, is Monday at midnight.

On Sunday, Israel Chemicals (ICL), the world'ssixth-largest potash producer, said its board decided to releaseall the trapped profit at units Dead Sea Works and Rotem AmfertNegev. As a result, ICL will pay 380 million shekels in taxes.

Teva's acting chief executive, Eyal Desheh, said the companyreached a beneficial agreement with Israel's government.

"The agreement generates sources for dividends to ourshareholders for years to come and settles tax assessments whichhad been in dispute for a long time," he said in a statement.

"We believe that such government policy strengthens thecontinued economic growth of the State of Israel by offering anattractive business environment for multinational companies likeTeva to invest in Israel," he added.

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