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INCOME TAX | 12 Months Ended
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Dec. 31, 2015
INCOME TAX [Abstract] |
INCOME TAX |
NOTE 15 | - | INCOME TAX
| A. | Taxes on income included in the statements of income:
|  | US dollars |
|  | Year ended December 31, |
(in thousands) |  |  | 2015 |  |  |  | 2014 |  |  |  | 2013 |
Income taxes (tax benefit): |  |  |  |  |  |  |  |  |  |  |  |
Current taxes: |  |  |  |  |  |
In Israel |  |  | 6,279 |  |  |  | 7,564 |  |  |  | 6,060 |
Outside Israel |  |  | 6,089 |  |  |  | 7,630 |  |  |  | 8,194 |
|  |  | 12,368 |  |  |  | 15,194 |  |  |  | 14,254 |
Deferred taxes: |  |  |  |  |  |  |  |  |  |  |  |
In Israel |  |  | (121 | ) |  |  | (471 | ) |  |  | (503 | )
Outside Israel |  |  | 206 |  |  |  | (432 | ) |  |  | (1,309 | )
|  |  | 85 |  |  |  | (903 | ) |  |  | (1,812 | )
Taxes in respect of prior years: |  |  |  |  |  |  |  |  |  |  |  |
In Israel |  |  | 369 |  |  |  | - |  |  |  | - |
Outside Israel |  |  | - |  |  |  | (45 | ) |  |  | 5 |
|  |  | 369 |  |  |  | (45 | ) |  |  | 5 |
|  |  | 12,822 |  |  |  | 14,246 |  |  |  | 12,447 |
| B. | Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment Law”)
|  | Until December 31, 2007, the Company and its Israeli subsidiaries reported income for tax purposes in accordance with the provisions of the Inflationary Adjustments Law, whereby taxable income was measured in NIS, adjusted for changes in the Israeli Consumer Price Index where results of operations for tax purposes were measured in terms of earnings in NIS after adjustments for changes in the Israeli Consumer Price Index ("CPI"). Commencing January 1, 2008, this law became void and in its place there are transition provisions, whereby the results of operations for tax purposes are measured on a nominal basis.
| C. | The Law for the Encouragement of Capital Investments, 1959 (the "Investment Law")
| 1. | On December, 2010, the Israeli parliament approved an amendment to the Investments Law, effective as of January 1, 2011, which introduces a new status of "Preferred Company" and "Preferred Enterprise". The amendment allows enterprises meeting certain required criteria to enjoy grants as well as tax benefits. The amendment also introduces certain changes to the map of geographic development areas for purposes of the Investments Law, which will take effect in future years. The amendment generally abolishes the previous tax benefit routes that were afforded under the Investment Law, specifically the tax-exemption periods previously allowed, and introduces new tax benefits for industrial enterprises meeting the criteria of the law, which include among others the following:
|  | A reduced corporate tax rate for industrial enterprises, provided that more than 25% of their annual income is derived from export, which will apply to the enterprise's entire preferred income so that in the tax years 2011-2012 the reduced tax rate will be 15% for preferred income derived from industrial facilities located in located in areas which are not classifies as area A. In the tax years 2013, the reduced tax rate was 12.5%. On August 5, 2013 the Israeli Parliament amended the Investments Law, by which, inter alia, it canceled the scheduled progressive reduction in the corporate tax rate for Preferred Enterprises and set it at 9% for enterprises located in zone A and 16% for enterprises located elsewhere, as of January 1, 2014. The reduced tax rates will no longer be contingent upon making a minimum qualifying investment in productive assets.
| 2. | As of December 31, 2015, only one Israeli subsidiary is entitled to a "Preferred Company" status pursuant to the investment law.
| D. | Israeli corporate tax rates
|  | On December 6, 2011, the Law for the Change in the Tax Burden (Legislative Amendments) – 2011 was publi sh ed. As part of this law, among other things, commencing from 2012 the Israeli corporate income tax rate was increased to 25%. I n addition, c ommencing in 2012, the tax rate on capital gains in real terms and the tax rate applicable to betterment in real terms were increased to 25%. On July 30, 2013, the Israeli parliament approved the Law for the Change in National Priorities (Legislative Amendments to Achieve Budgetary Goals for 2013 and 2014) – 2013 (hereinafter – the “Law for the Change in National Priorities”), which, among other things increased the standard corporate income tax rate from 25% to 26.5% effective as of January 1, 2014. On January 4, 2016, the plenary Knesset passed the Law for Amendment of the Income Tax Ordinance No. 216 which provides, inter alia, for a reduction of the corporate tax rate commencing from 2016 and thereafter by the rate of 1.5% such that the rate will be 25%. This change of tax rate did not have material effect on the deferred tax assets of the Company and its Israeli subsidiaries.
| E. | Non-Israeli subsidiaries
|  | Non-Israeli subsidiaries are taxed according to the tax laws and rates in their country of residence.
| F. | Use of assumptions and judgments
|  | The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and can be ambiguous; the Company is, therefore, obliged to make many subjective assumptions and judgments regarding the application of such laws and regulations to its facts and circumstances. In addition, interpretations of and guidance surrounding income tax laws and regulations are subject to changes over time. Any changes in the Company's subjective assumptions and judgments could materially affect amounts recognized in its consolidated balance sheets and statements of income.
| G. | Tax assessments
|  | The Company has received final tax assessments through the 2009 tax year. On August 4, 2014, the Company announced that it received from the Israeli tax authority ("ITA") tax assessments for the years 2010-2012 amounting to NIS 36 million (approximately US$ 10.5 million). Approximately 50% is due to disallowance of various deductions and the remaining balance is due to timing differences of the deduction of certain expenses, which will be deducted in the coming years. The Company filed an objection with the ITA for the above tax assessments. In July 2015, the Company reached an agreement with the ITA in respect of the above tax assessment according to which there was no significant impact on the Company's provision with respect to prior years. The Company and a certain Israeli subsidiary have received final tax assessments through the 2012 tax year. One of the subsidiaries in Brazil has received final tax assessments through the 2010 tax year. The other subsidiaries have not yet been assessed since incorporation.
| H. | Carry forward foreign tax credits and tax losses
|  | As of December 31, 2015, the Company's non-Israeli subsidiary in the United States has available carry forward foreign tax credits in an amount of approximately US$ 3.9 million. Most of such carry forward tax credits may be utilized until 2022. In addition the subsidiary has carry forward tax losses of approximately US$ 1.2 million.
| I. | The following is a reconciliation between the theoretical tax on pretax income, at the applicable Israeli tax rate, and the tax expense reported in the financial statements:
|  |  | US dollars |
|  |  | Year ended December 31, |
(in thousands) |  |  | 2015 |  |  |  | 2014 |  |  | 2013 |
Pretax income |  |  | 41,833 |  |  |  | 47,574 |  |  | 38,002 |
Statutory tax rate |  |  | 26.5 | % |  |  | 26.5 | % |  | 25 | %
Tax computed at the ordinary tax rate |  |  | 11,086 |  |  |  | 12,607 |  |  | 9,500 |
Nondeductible expenses (income) |  |  | 526 |  |  |  | 10 |  |  | 1,365 |
Losses in respect of which no deferred taxes were generated (including changes in valuation allowance) |  |  | 831 |  |  |  | (304 | ) |  | 137 |
Deductible financial expenses recorded to other comprehensive income |  |  | (439 | ) |  |  | (365 | ) |  | (312 | )
Tax adjustment in respect of different tax rates |  |  | 1,411 |  |  |  | 1,662 |  |  | 1,877 |
Taxes in respect of withholding at the source from royalties and dividends |  |  | 78 |  |  |  | 615 |  |  | 817 |
Adjustment in respect of tax rate deriving from “approved enterprises” |  |  | (405 | ) |  |  | (558 | ) |  | (467 | )
Others |  |  | (266 | ) |  |  | 579 |  |  | (470 | )
|  |  | 12,822 |  |  |  | 14,246 |  |  | 12,447 |
| J. | Summary of deferred taxes
|  | Composition:
|  | US dollars |
|  | Year ended December 31, |
(in thousands) |  | 2015 |  | 2014 |
Deferred taxes included in other current assets: |  |  |  |  |
Provision for employee related obligations |  | 145 |  | 130 |
Provision for legal obligation and other |  | 2,607 |  | 3,519 |
|  | 2,752 |  | 3,649 |
|  | Composition:
|  |  | US dollars |
|  |  | Year ended December 31, |
(in thousands) |  |  | 2015 |  | 2014 |
Long-term deferred income taxes: |  |  |  |  |  |
Provision for employee related obligations |  |  | 718 |  | 678 |
Carry forward tax losses and foreign tax credit |  |  | 4,321 |  | 4,321 |
Temporary differences, net |  |  | 1,237 |  | 1,010 |
|  |  | 6,276 |  | 6,009 |
Valuation allowance |  |  | (3,997 | ) | (3,273 | )
|  |  | 2,279 |  | 2,736 |
|  | US dollars |
|  | Year ended December 31, |
(in thousands) |  |  | 2015 |  |  | 2014 |
Deferred income taxes included in long-term investments and other assets |  |  | 2,279 |  |  | 2,886 |
Deferred income taxes included in long-term liabilities |  |  | - |  |  | (150 | )
|  |  | 2,279 |  |  | 2,736 |
| K. | Income before income taxes is composed as follows:
|  | US dollars |
|  | Year ended December 31, |
(in thousands) |  | 2015 |  | 2014 |  | 2013 |
The Company and its Israeli subsidiaries |  | 23,987 |  | 26,021 |  | 17,296 |
Non-Israeli subsidiaries |  | 17,846 |  | 21,553 |  | 20,706 |
|  | 41,833 |  | 47,574 |  | 38,002 |
| L. | Uncertain tax positions The Company and its subsidiaries files income tax returns in Israel, US, Argentina and Brazil. Reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | US dollars |
(in thousands) |  |  |
Balance at January 1, 2014 |  | 472 |
Translations differences related to the current year |  | (51 | )
Balance at December 31, 2014 |  | 421 |
Decrease related tax positions of prior years |  | (419 | )
Translations differences related to the current year |  | (2 | )
Balance at December 31, 2015 |  | - |

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