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TAXES ON INCOME | 12 Months Ended
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Dec. 31, 2011
TAXES ON INCOME | NOTE 8 - TAXES ON INCOME
| a. | The Company
Protalix BioTherapeutics, Inc. is taxed according to U.S. tax laws. The Company's income is, or will be, taxed in the United States at the rate of up to 39%.
| b. | Protalix Ltd.
The Israeli Subsidiary is taxed according to Israeli tax laws:
| 1. | Measurement of results for tax purposes
Since 2008, the Company has measured the results of the Israeli Subsidiary for tax purposes in nominal terms in NIS. Pursuant to the Israel Income Tax Law (Adjustments for Inflation), 1985 (the “Adjustments Law”), the Subsidiary’s results for tax purposes have been measured through 2007 on a real basis, based on changes in the Israel consumer price index.
| 2. | Tax rates
The income of the Israeli Subsidiary, other than income from “Approved Enterprises,” is taxed in Israel at the regular rate. See 3 below. According to the provisions of the Law for Amending the Israel Income Tax Ordinance, 2005, corporate tax rates will be gradually lowered, resulting in a corporate tax rate for 2009 and thereafter: 2009 – 26% and for 2010 and thereafter – 25%. On July 14, 2009, the Israel Economic Efficiency Law (Legislation Amendments for Applying the Economic Plan for 2009 and 2010), 2009, became effective, stipulating, among other things, an additional gradual decrease in tax rates in 2011 and thereafter, as follows: 2011 – 24%, 2012 – 23%, 2013 – 22%, 2014 – 21%, 2015 – 20% and 2016 and thereafter – 18%. On December 5, 2011, the "Tax Burden Distribution Law" (hereinafter - the 2011 amendment) was officially published, discontinuing a previously approved gradual decrease in corporate tax provided in the 2009 amendment, and setting the corporate tax rate in Israel for 2012 and thereafter to 25%. Capital gain is subject to capital gain tax according to corporate tax rate in the year of selling the assets.
| 3. | The Law for the Encouragement of Capital Investments, 1959 (the “Encouragement of Capital Investments Law”)
Under the Encouragement of Capital Investments Law, including Amendment No. 60 to the Encouragement of Capital Investments Law as published in April 2005, by virtue of the “Approved Enterprise” or “Benefited Enterprise” status the Israeli Subsidiary is entitled to various tax benefits as follows:
| a. | Reduced tax rates
Income derived from the Approved Enterprise during a 10-year period commencing upon the year in which the enterprise first realizes taxable income is tax exempt, provided that the maximum period to which it is restricted by the Encouragement of Capital Investments Law has not elapsed. The Israeli Subsidiary has an “Approved Enterprise” plan since 2004 and “Benefited Enterprise” plan since 2009. The period of benefits in respect of the main enterprise of the Company has not yet commenced. The period during which the Company is entitled to benefits in connection with the Benefited Enterprise expires in 2021. If the Israeli Subsidiary subsequently pays a dividend out of income derived from the “Approved Enterprise” or “Benefited Enterprise” during the tax exemption period, it will be subject to a tax on the amount distributed, including any company tax on these amounts, at the rate which would have been applicable had such income not been exempted. In addition to the corporate taxes in Israel, the Company might be subject to a withholding tax on the U.S. revenue source portion of the payments made to the Company for its share of Pfizer’s net profits under the Pfizer Agreement. The withholding tax rate is currently 15%.
| b. | Accelerated depreciation
The Israeli Subsidiary is entitled to claim accelerated depreciation, as provided by Israeli law, in the first five years of operation of each asset, in respect of buildings, machinery and equipment used by the Approved Enterprise and the Benefited Enterprise.
| c. | Conditions for entitlement to the benefits
The Israeli Subsidiary’s entitlement to the benefits described above is subject to its fulfilling the conditions stipulated by the law, rules and regulations published thereunder, and the instruments of approval for the specific investment in an approved enterprise. If there is any failure by the Israeli Subsidiary to comply with these conditions, the benefits may be cancelled and the Subsidiary may be required to refund the amount of the benefits, in whole or in part, with interest. The Company received a final implementation approval with respect to its “Approved Enterprise” from the Investment Center.
| d. | Amendment of the Law for the Encouragement of Capital Investments, 1959
The Encouragement of Capital Investments Law was amended as part of the Economic Policy Law for the years 2011-2012, which was passed by the Israeli Knesset on December 29, 2010 (the “Capital Investments Law Amendment”). The Capital Investments Law Amendment sets alternative benefit tracks to those currently in effect under the provisions of the Encouragement of Capital Investments Law. The benefits granted to the Benefited Enterprises will be unlimited in time, unlike the benefits granted to special Benefited enterprises, which will be limited for a 10-year period. The benefits shall be granted to companies that will qualify under criteria set in the law; for the most part, those criteria are similar to the criteria that were set in the Encouragement of Capital Investments Law prior to its amendment. Under the transitional provisions of the Encouragement of Capital Investments Law, the Company is entitled to take advantage of the tax benefits available under the Encouragement of Capital Investments Law prior to its amendment until the end of the benefits period, as defined in the Encouragement of Capital Investments Law. The Company will be allowed to set the “year of election” no later than tax year 2012, provided that the minimum qualifying investment was made not later than the end of 2010. On each year during the benefits period, the Company will be able to elect that the Capital Investments Amendment apply to the Company, thereby making the tax rates described above available to the Company. An election to have the Capital Investments Amendment apply is irrecoverable.
| 4. | The Law for the Encouragement of Industry (Taxation), 1969:
The Israeli Subsidiary is an “industrial company,” as defined under the Law for the Encouragement of Industry (Taxation), 1969 (the “Law for the Encouragement of Industry”). As such, the Israeli Subsidiary is entitled to claim depreciation at increased rates for equipment used in industrial activity, as stipulated by regulations published under Law for the Encouragement of Industry, and has done so. Under the provisions of the Income Tax Regulations “Accelerated Depreciation in respect of Equipment acquired during the Defined Period” (Temporary Orders), industrial companies whose operations are mostly “eligible operations” are entitled to claim accelerated depreciation at a rate of 50% on machinery and equipment acquired from June 1, 2008 to May 31, 2009.
| c. | Tax losses carried forward to future years
As of December 31, 2011, the Company had aggregate net operating loss (NOL) carry-forwards equal to approximately $63,040 that are available to reduce future taxable income as follows:
| 1. | The Company
The NOL carry-forward of the Company equal to approximately $11,740 may be restricted under Section 382 of the Internal Revenue Code (“IRC”). IRC Section 382 applies whenever a corporation with NOL experiences an ownership change. As a result of IRC Section 382, the taxable income for any post change year that may be offset by a pre-change NOL may not exceed the general IRC Section 382 limitation, which is the fair market value of the pre-change entity multiplied by the IRC long-term tax exempt rate.
| 2. | Protalix Ltd.
At December 31, 2011, the Israeli Subsidiary had approximately $51,300 of NOL carry-forwards that are available to reduce future taxable income with no limited period of use.
| d. | Deferred income taxes:
The components of the Company’s net deferred tax assets at December 31, 2010 and 2011 were as follows:
|  | December 31, |
|  | 2010 |  |  | 2011 |
In respect of: |  |  |  |  |  |  |  |
Research and Development expenses |  |  |  |  |  | $ | 4,119 |
Property and equipment |  | $ | (143 | ) |  |  | (149 | )
Holiday and recreation pay |  |  | 296 |  |  |  | 305 |
Severance pay obligation |  |  | 130 |  |  |  | 164 |
Deferred revenues |  |  | 3,691 |  |  |  | 4,746 |
Net operating loss carry forwards |  |  | 3,599 |  |  |  | 4,579 |
Valuation allowance |  |  | (7,573 | ) |  |  | (13,764 | )
|  |  | - |  |  |  | - |
Deferred taxes are computed using the tax rates expected to be in effect when those differences reverse. The Company used tax rates of 39%, 25% and 0%.
| e. | Reconciliation of the theoretical tax expense to actual tax expense
The main reconciling items between the statutory tax rate of the Company and the effective rate is the provision for full valuation allowance in respect of tax benefits from carry forward tax losses due to the uncertainty of the realization of such tax benefits (see above).
| f. | Tax assessments
In accordance with the Income Tax Ordinance, as of December 31, 2011, all of Protalix Ltd.’s tax assessments through tax year 2007 are considered final. A summary of open tax years by major jurisdiction is presented below:
Jurisdiction: |  | Years:
Israel |  | 2008-2011
United States (*) |  | 2002-2011
Netherlands |  | 2009-2011
(*) Includes federal, state and local (or similar provincial jurisdictions) tax positions.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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