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TAXES ON INCOME | 12 Months Ended
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Dec. 31, 2015
TAXES ON INCOME [Abstract] |
TAXES ON INCOME | NOTE 10 - TAXES ON INCOME
| a. | The Company
Protalix BioTherapeutics, Inc. is taxed according to U.S. tax laws. The Company’s income is 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 Israeli 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 corporate tax rates which were 25% in 2013 and 26.5% for 2014 and 2015. In January 2016, the Law for the Amendment of the Income Tax Ordinance (No.216) was published, enacting a reduction of corporate tax rate beginning in 2016 and thereafter, from 26.5% to 25%. There is no impact on the financial statements of the Company as a result of the changes in the Israeli corporate tax rate as the Israeli subsidiary is in a loss position for tax purposes. Capital gain is subject to capital gain tax according to corporate tax rate for the year during which the assets are sold.
| 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 gross amount distributed (including the tax on these amounts), at the rate which would have been applicable had such income not been exempted.
| 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. Failure by the Israeli Subsidiary to comply with these conditions, may result in the cancellation of the benefits, in whole or in part, and the Subsidiary may be required to refund the amount of the benefits with interest. The Israeli Subsidiary 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 Company elected not to have the Capital Investments Law Amendment apply to the Company.
| c. | Tax losses carried forward to future years
As of December 31, 2015, the Company had aggregate net operating loss (NOL) carry-forwards equal to approximately $124 million that are available to reduce future taxable income as follows:
| 1. | The Company
The NOL carry-forward of the Company equal to approximately $19 million 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, 2015, the Israeli Subsidiary had approximately $105 million 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, 2014 and 2015 were as follows:
|  | December 31, |
(U.S. dollars in thousands) |  | 2014 |  | 2015 |
In respect of: |  |  |  |  |  |  |
Research and development expenses |  | $ | 3,136 |  | $ | 3,235 |
Property and equipment |  |  | (372) |  |  | (168) |
Provision for vacation |  |  | 374 |  |  | 352 |
Severance pay obligation |  |  | 185 |  |  | 169 |
Deferred revenues |  |  | 8,658 |  |  | - |
Net operating loss carry forwards |  |  | 28,130 |  |  | 33,451 |
Valuation allowance |  |  | (40,111) |  |  | (37,039) |
|  |  | - |  |  | - |
Deferred taxes are computed using the tax rates expected to be in effect when those differences reverse. The Company used tax rates of 39%, 26.5%, 25% and 0%.
| e. | Reconciliation of the theoretical tax expense to actual tax expense
The main reconciling item between the statutory tax rate of the Company and the effective rate is the provision for a 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, 2015, all of Protalix Ltd.’s tax assessments through tax year 2011 are considered final. A summary of open tax years by major jurisdiction is presented below:
Jurisdiction: |  |  | Years: |
Israel |  |  | 2012-2015 |
United States (*) |  |  | 2012-2015 |
(*) Includes federal, state and local (or similar provincial jurisdictions) tax positions.

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