Arnona Discount for Hi-Tech Companies

Hi-tech companies in Israel are eligible for a special property tax (Arnona) discount, provided they are officially recognized as software development companies. The amount of the Arnona discount varies from city to city but is widely recognized across all local authorities in Israel. This discount is commonly known as “Arnona Classification for Software Companes.” This article will detail how to obtain this classification and the various benefits it offers.

Our law offices, located in Tel Aviv and Jerusalem, specialize in obtaining Arnona discounts for hi-tech companies. If you own a software development business or are considering establishing a software house, it is highly advisable to consult with a lawyer specializing in Arnona matters. This will ensure that all documentation is properly managed, and you understand the process involved in obtaining the appropriate classification, which is associated with a property tax discount for software houses.

Arnona Discount for Hi-Tech Companies – Software House

Many cities across Israel actively seek to attract hi-tech companies, hoping these companies will move their offices to their area, providing more local jobs and drawing a wealthy population to the city. One of the main approaches used by different municipalities to attract hi-tech companies is through changing the Arnona classification, known as the “Arnona Classification for Software House.” This classification significantly reduces the Arnona rate for the company’s office building, making it about half of the rate for a standard office building.

The formal name for this change among business entities is “Arnona Classification for Software House,” as previously mentioned. Legally, it is important to note that this refers to a change in the Arnona classification – that is, reclassifying the office building as a software house. This type of discount applies to business entities and not to individuals.

How Does the Process of Changing Arnona Classification to a Software House Work?

Changing the Arnona classification to a software house requires submitting an application to the relevant municipal authority. The application for Arnona classification change can be submitted even before moving to new office premises. The best way to do this is through a preliminary consultation with an experienced and specialized lawyer. The lawyer will inspect the premises before occupation. Based on the layout of the office building, its content, and its division into departments or rooms, a decision will be made on whether and how to submit the Arnona classification request.

Conditions for Receiving Arnona Classification for Hi-Tech Companies

The approval of an application for software house classification depends on the fact that software production is the primary source of business revenue. Additionally, the area designated for software production must constitute the main part of the business. When reviewing the Arnona classification application, the local authority will also review the data and various information published by the company. Moreover, the authority examines information about the company through its website, advertisements, annual reports, and so on. All these serve as evidence of the company’s organizational structure and the extent of software development in its operations.

It is crucial to ensure that the content of publications and information presented by the company matches its software production activities. Any discrepancy between these and the Arnona classification application as a software house may result in the application’s rejection and could even be used against the company in an Arnona appeals committee or the Administrative Court. Therefore, it is highly recommended to seek legal assistance in Arnona matters at the early stage of submitting the Arnona classification change application.

It is also important to emphasize that in many cases, the Arnona discount for software houses is only given for the development areas used by programmers. For these parts of the business, a lower rate is charged, while for administrative areas, the standard office rate applies. Nevertheless, this still represents significant long-term savings.

Differences Between Cities Regarding Software House Discount

In Israel, there is no national law concerning the opening of a business or specific regulations for hi-tech businesses. Therefore, each city is entitled to define a software house differently and determine the rates it chooses to offer for Arnona classification.

For an overview of the different Arnona classifications for software houses according to local authorities, click this link (information sourced from Calcalist).

Key Points for Submitting an Arnona Classification Change Application for Hi-Tech Companies – Software House

The term “Software House” for the purpose of Arnona classification is unique and specific. Hence, it is advisable to consult with an Arnona lawyer to ensure that the hi-tech company meets the required criteria.

A good example is a hi-tech company that developed software in the past but now focuses on marketing, selling subscriptions, and similar activities, which do not fit the definition of a software house. Such a company does not qualify for the “Software House” classification and therefore is not eligible for the discount. To avoid a lengthy and tedious process, an initial consultation with a lawyer specializing in Arnona matters will save your company valuable time and costs.

Procedures regarding the classification change may apply and be reviewed each year. Therefore, if there is an ongoing case for a change in the Arnona classification for a software house for a particular year, a renewed and independent application for Arnona classification change can be submitted for the following year.

We thank Mr. Yonatan Gavrielov for writing this article.

Contact Expert Arnona Lawyers

Our law offices represent many businesses in dealings with local authorities and assist them in applications and appeals related to Arnona charges. We have a team of professional lawyers with extensive experience accumulated over the years who can help solve any issues you may face if you encounter bureaucratic challenges with your business. Feel free to contact us using the phone numbers listed at the bottom of the page. Thank you.

 :  :

03-3724722

055-9781688

office@lawoffice.org.il