	US dollars
	Year ended December 31,
(in thousands)	2018			2017			2016
Income taxes (tax benefit):
Current taxes:
In Israel		6,622			6,251			5,581
Outside Israel		8,325			10,308			10,303
		14,947			16,559			15,884
Deferred taxes:
In Israel		781			(1,982	)		91
Outside Israel		1,565			(169	)		(1,179	)
		2,346			(2,151	)		(1,088	)
Taxes in respect of prior years:
In Israel (*)		(20	)		1,775			81
Outside Israel (**)		-			1,522			-
		(20	)		3,297			81
		17,273			17,705			14,877

(*)

During November 2017, the Company has received from the Israeli tax authority ("ITA") tax assessments for the years 2013-2015 amounting to NIS 11.3 million (approximately US$ 3.1 million). An amount of NIS 7.2 million (approximately US$ 2 million) due to the timing differences related to the deduction of certain expenses for tax purposes, which was agreed to be deducted in the coming years. Accordingly, the Company recorded an amount of NIS 6.2 million (approximately US$ 1.8 million) as tax expense related to prior periods and a deferred tax benefit in a similar amount. In addition, the Company was required to pay the ITA an amount of NIS 1.8 million (approximately US$ 0.5 million) as interest expense. Such amount was recognized as part of financing income, net.

(**)

During November 2017, one of our subsidiaries in Brazil has received from the Brazilian tax authority ("RFB") a tax assessment for the years 2012-2014 amounting to BRL 10.3 million (approximately US$ 3.1 million), mainly due to an undeductable expenses. Accordingly, our subsidiary recorded an amount of BRL 4.8 million (approximately US$ 1.5 million) as tax expense related to prior periods. In addition, our subsidiary was required to pay an amount of BRL 3.6 million (approximately US$ 1.1 million) as penalty and BRL 1.7 (approximately US$ 0.5 million) as interest expense. Such amount was recognized as part of financing income, net.

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.

On December 22, 2016, the Israeli parliament passed the Law for Economic Efficiency (Legislative Amendments for Achieving Budget Objectives in the Budget Years 2017 and 2018) – 2016 (hereinafter – the “Economic Efficiency Law”) and on December 29, 2016, the Law was publicized in the Official Gazette. The Economic Efficiency Law, among other things, reduced the tax rate applicable to a preferred enterprise located in Development Zone A from 9% to 7.5% (the tax rate applicable to a preferred enterprise not located in Development Zone A remained unchanged at 16%). The Economic Efficiency Law also outlined new benefit tracks for preferred technology enterprises.

On January 4, 2016, the full plenum of the Israeli parliament passed the second and third readings of the Amendment to the Israel Income Tax Ordinance (Amendment No. 216) – 2016 (hereinafter – the “Amendment to the Law”) and on January 5, 2016, the Amendment to the Law was publicized in the Official Gazette. The Amendment to the Law stipulates, among other things, that the corporate tax rate would be lowered from 26.5% to 25% commencing from January 1, 2016.

On December 22, 2016, the Israeli parliament (the "Knesset") passed the Law for Economic Efficiency (Legislative Amendments to Achieve Budgetary Goals for the 2017 and 2018 Budget Years) – 2016 (hereinafter – the “Economic Efficiency Law”) and on December 29, 2016, it was publicized in the Official Gazette. The Economic Efficiency Law stipulates, among other things, that the corporate tax rate would be reduced from a rate of 25% to 23% from January 1, 2018 and thereafter. Regarding the period from the date on which the Economic Efficiency Law went into effect (January 1, 2017) until December 31, 2017, a temporary provision was set down whereby the corporate tax rate will be 24%. In addition, the tax rate on capital gains in real terms and the tax rate applicable to the amount of a betterment in real terms were reduced by the same percentages.

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.

The Company and a certain Israeli subsidiary have received final tax assessments through the 2015 tax year. One of the subsidiaries in Israel has received final tax assessments through the 2016 tax year. One of the subsidiaries in Brazil has received final tax assessments through the 2015 tax year. The other subsidiaries have not yet been assessed since incorporation.

As of December 31, 2018, the Company's non-Israeli subsidiary in the United States has available carry forward foreign tax credits in an amount of approximately US$ 3.6 million. Most of such carry forward tax credits may be utilized until 2022.

The following is 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)	2018			2017			2016
Pretax income		76,233			55,546			50,054
Statutory tax rate		23	%		24	%		25	%
Tax computed at the ordinary tax rate		17,534			13,331			12,514
Nondeductible expenses (income)		(2,785	)		(815	)		766
Losses in respect of which no deferred taxes were generated (including changes in valuation allowance)		(236	)		243			(151	)
Deductible financial expenses recorded to other comprehensive income		(177	)		(113	)		90
Tax adjustment in respect of different tax rates		2,384			3,119			2,040
Taxes in respect of withholding at the source from royalties and dividends		31			542			95
Adjustment in respect of tax rate deriving from “approved enterprises”		(100	)		(436	)		(501	)
Others		622			1,834			24
		17,273			17,705			14,877

	US dollars
	Year ended December 31,
(in thousands)	2018			2017
Deferred taxes
Provision for vacation, recreation and bad debt		258			276
Provision for legal obligation and other		5,500			6,262
Provision for employee related obligations		1,147			849
Carry forward tax losses and foreign tax credit		3,600			3,600
Temporary differences, net		(1,360	)		887
		9,145			11,874
Valuation allowance		(3,476	)		(3,476	)
		5,669			8,398

	US dollars
	Year ended December 31,
(in thousands)	2018			2017

Deferred income taxes included in long-term investments and other assets		12,127			8,398
Deferred income taxes included in long-term liabilities		(6,458	)		-
		5,669			8,398

	US dollars
	Year ended December 31,
(in thousands)	2018		2017		2016
The Company and its Israeli subsidiaries		46,138		22,138		22,634
Non-Israeli subsidiaries		30,095		33,408		27,420
		76,233		55,546		50,054