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INCOME TAX | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAX |
NOTE 17 | - | INCOME TAX
| A. | Taxes on income included in the statements of income:
|  | US dollars |
|  | Year ended December 31, |
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Income taxes (tax benefit): |  |  |  |  |  |  |  |  |
Current taxes: |  |  |  |  |  |  |  |  |
In Israel |  |  | 6,155 |  |  |  | 6,622 |  |  |  | 6,251 |
Outside Israel |  |  | 7,674 |  |  |  | 8,325 |  |  |  | 10,308 |
|  |  | 13,829 |  |  |  | 14,947 |  |  |  | 16,559 |
Deferred taxes: |  |  |  |  |  |  |  |  |  |  |  |
In Israel |  |  | 299 |  |  |  | 781 |  |  |  | (1,982 | )
Outside Israel |  |  | (2,545 | ) |  |  | 1,565 |  |  |  | (169 | )
|  |  | (2,246 | ) |  |  | 2,346 |  |  |  | (2,151 | )
Taxes in respect of prior years: |  |  |  |  |  |  |  |  |  |  |  |
In Israel (*) |  |  | 439 |  |  |  | (20 | ) |  |  | 1,775 |
Outside Israel (**) |  |  | 212 |  |  |  | - |  |  |  | 1,522 |
|  |  | 651 |  |  |  | (20 | ) |  |  | 3,297 |
|  |  | 12,234 |  |  |  | 17,273 |  |  |  | 17,705 |
| A. | Taxes on income included in the statements of income (cont.):
| (*) | 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 non-deductible 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.
| 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 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.
| 2. | As of December 31, 2019, one Israeli subsidiary is entitled to a "Preferred Company" status pursuant to the investment law.
| D. | The Law for the Encouragement of Capital Investments, 1959, under the 2016 amendment (the "Investment Law")
| 1. | In December 2016 new legislation amended the Investments Law (the "2016 amendment"). Under the 2016 amendment a new status of "Technological Preferred Enterprise" was introduced to the Investment Law.
Technological Preferred Enterprise – an enterprise which, amongst other condition, is part of a consolidated group with consolidated revenues of less than NIS 10 billion. A Technological Preferred Enterprise which is located in areas other than Development Zone A will be subject to a tax rate of 12% on profits derived from intellectual property, and a Technological Preferred Enterprise in Development Zone A will be subject to tax rate at a 7.5%.
| 2. | As of December 31, 2019, one Israeli subsidiary is entitled to a "Technological Preferred Enterprise" status pursuant to the investment (under the 2016 amendment) law and subject to 12% corporate tax rate. Income not eligible for Technological Preferred Enterprise is tax at the regular corporate tax rate or at the preferred tax rate as mention in Note C1 above, as the case may be.
| E. | Israeli corporate tax rates
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.
| F. | Non-Israeli subsidiaries
Non-Israeli subsidiaries are taxed according to the tax laws and rates in their country of residence.
| G. | 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.
| H. | Tax assessments
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 2015tax year. The other subsidiaries have not yet been assessed since incorporation. I. Carry forward foreign tax credits and tax losses As of December 31, 2019, there is no losses carried forward that is likely to use in the near future.
| J. | 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) |  | 2019 |  |  | 2018 |  |  | 2017 |
Pretax income |  |  | 23,204 |  |  |  | 76,233 |  |  |  | 55,546 |
Statutory tax rate |  |  | 23 | % |  |  | 23 | % |  |  | 24 | %
Tax computed at the ordinary tax rate |  |  | 5,337 |  |  |  | 17,534 |  |  |  | 13,331 |
Nondeductible expenses (income) |  |  | 3,117 |  |  |  | (2,785 | ) |  |  | (815 | )
Losses in respect of which no deferred taxes were generated (including changes in valuation allowance) |  |  | - |  |  |  | (236 | ) |  |  | 243 |
Deductible financial expenses recorded to other comprehensive income |  |  | 297 |  |  |  | (177 | ) |  |  | (113 | )
Tax adjustment in respect of different tax rates |  |  | 3,045 |  |  |  | 2,384 |  |  |  | 3,119 |
Taxes in respect of withholding at the source from royalties and dividends |  |  | 725 |  |  |  | 31 |  |  |  | 542 |
Adjustment in respect of tax rate deriving from “approved enterprises” |  |  | (128 | ) |  |  | (100 | ) |  |  | (436 | )
Others |  |  | (159 | ) |  |  | 622 |  |  |  | 1,834 |
|  |  | 12,234 |  |  |  | 17,273 |  |  |  | 17,705 |
| K. | Summary of deferred taxes
Composition:
|  | US dollars |
|  | Year ended December 31, |
(in thousands) |  | 2019 |  |  | 2018 |
Deferred taxes |  |  |  |  |  |
Provision for vacation, recreation and bad debt |  |  | 350 |  |  |  | 258 |
Provision for legal obligation and other |  |  | 4,631 |  |  |  | 5,500 |
Provision for employee related obligations |  |  | 1,193 |  |  |  | 1,147 |
Carry forward tax losses and foreign tax credit |  |  | - |  |  |  | 3,600 |
Temporary differences, net |  |  | 1,344 |  |  |  | (1,360 | )
|  |  | 7,518 |  |  |  | 9,145 |
Valuation allowance |  |  | - |  |  |  | (3,476 | )
|  |  | 7,518 |  |  |  | 5,669 |
|  | US dollars |
|  | Year ended December 31, |
(in thousands) |  | 2019 |  |  | 2018 |
Deferred income taxes included in long-term investments and other assets |  |  | 10,385 |  |  |  | 12,127 |
Deferred income taxes included in long-term liabilities |  |  | (2,867 | ) |  |  | (6,458 | )
|  |  | 7,518 |  |  |  | 5,669 |
| L. | Income before income taxes is composed as follows:
|  | US dollars |
|  | Year ended December 31, |
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
The Company and its Israeli subsidiaries |  |  | 27,045 |  |  |  | 46,138 |  |  |  | 22,138 |
Non-Israeli subsidiaries |  |  | (3,841 | ) |  |  | 30,095 |  |  |  | 33,408 |
|  |  | 23,204 |  |  |  | 76,233 |  |  |  | 55,546 |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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