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TAXES ON INCOME | 12 Months Ended
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Jun. 30, 2012
TAXES ON INCOME [Abstract] |
TAXES ON INCOME | NOTE 11:-TAXES ON INCOME
A. | Tax laws applicable to the companies:
| 1. | Pluristem Therapeutics Inc. is taxed under U.S. tax laws.
| 2. | Pluristem Ltd. is taxed under Israeli tax laws.
B. | Tax assessments:
The subsidiary has not received final tax assessments since its incorporation; however, the assessments of the Subsidiary are deemed final through 2006.
C. | Tax rates applicable to the Company:
| 1. | Pluristem Therapeutics Inc.:
The tax rates applicable to Pluristem Therapeutics Inc., a Nevada corporation, are corporate (progressive) tax at the rate of up to 35%, excluding state tax and local tax if any, which rates depend on the state and city in which Pluristem Therapeutics Inc. conducts its business.
| 2. | The Subsidiary:
On December 5, 2011, the Israeli Parliament (the Knesset) passed the Law for Tax Burden Reform (Legislative Amendments) 2011 (the "Law"), which, among other things, cancels effective as of 2012, the scheduled progressive reduction in the corporate tax rate. The Law also increases the corporate tax rate to 25% in 2012. In view of this increase in the corporate tax rate to 25% in 2012, the real capital gains tax rate and the real betterment tax rate were also increased accordingly. The Law did not have an effect on the Subsidiary's financial position and results of operations. Israeli companies are generally subject to capital gains tax at the rate of the Israeli corporate tax (which was 25% in 2012). Tax Benefits Under the Law for the Encouragement of Capital Investments, 1959 (the "Encouragement Law") According to the Encouragement Law, the Subsidiary is entitled to various tax benefits due to "beneficiary enterprise" status granted to its enterprise, as implied by the Encouragement Law. The principal benefits by virtue of the Law are: Tax benefits and reduced tax rates: On July 7, 2010, the Subsidiary has received a letter of approval (the "Ruling") from the Israeli Tax Authority. According to the Ruling, the Subsidiary's expansion program of its plant was granted the status of a "Benefited Enterprise" under the "Alternative Track" (the "Program"). The Subsidiary chose the year 2007 as the election year of the Program. Under the Program, the Subsidiary, which was located in a National Priority Zone "B" with respect to the year 2007, is tax exempt in the first six years of the benefit period and subject to tax at the reduced rate of 10%-25% for a period of one to four years for the remaining benefit period (dependent on the level of foreign investments).
C. | Tax rates applicable to the Company: (cont:)
Following the enactment of Amendment No. 60 to the Encouragement Law, subsequent to April 1, 2005, companies whose year of election entitled them to a beneficiary enterprise status are required, among others, to make a minimum qualifying investment. This condition requires an investment in the acquisition of productive assets such as machinery and equipment, which must be carried out within three years. The minimum qualifying investment required for setting up a plant is NIS 300,000 , linked to the Israeli CPI in accordance with the guidelines of the Israeli tax authorities. As for plant expansion, the minimum qualifying investment is the higher of NIS 300,000, linked to the Israeli CPI as stated above, and an amount equivalent to the "qualifying percentage" of the value of the productive assets. Productive assets that are used by the plant but not owned by it will also be viewed as productive assets. The qualifying percentage of the value of the productive assets is as follows:
The value of productive assets before the expansion (NIS in millions) |  | The new proportion that the required investment bears to the value of productive assets
Up to NIS 140 |  | 12%
NIS 140 - NIS 500 |  | 7%
More than NIS 500 |  | 5%
The income qualifying for tax benefits under the alternative track is the taxable income of a "beneficiary company" that has met certain conditions as determined by the Encouragement Law, and which is derived from an industrial enterprise. The Encouragement Law specifies the types of qualifying income that is entitled to tax benefits under the alternative track both in respect of an industrial enterprise and of a hotel, whereby income from an industrial enterprise includes, among others, revenues from the production and development of software products and revenues from industrial research and development activities performed for a foreign resident (and approved by the Head of the Administration of Industrial Research and Development). As stated above, the Subsidiary's expansion program of its plant was granted the status of a "beneficiary enterprise", in accordance with the Encouragement Law, under the alternative benefits track. Accordingly, income derived from the beneficiary enterprise is subject to the benefits and conditions stated above. In respect of expansion programs pursuant to Amendment No. 60 to the Encouragement Law, the benefit period starts at the later of the year elected and the first year the Company earns taxable income provided that 12 years have not passed since the beginning of the year of election and for companies in development area A - 14 years since the beginning of the year of election. The benefit period for the enterprise of the subsidiary will expire in 2018 (12 years since the beginning of the year of election - 2007). If a dividend is distributed out of tax exempt profits, as above, the Subsidiary will become liable for tax at the rate applicable to its profits from the beneficiary enterprise in the year in which the income was earned, as if it was not under the alternative track (tax at the rate of 10- 25%, dependent on the level of foreign investments) and to withholding tax rate of 15% (or lower, under an applicable tax treaty). As for beneficiary enterprises pursuant to Amendment No. 60 to the Encouragement Law, the basic condition for receiving the benefits under this track is that the enterprise contributes to the country's economic growth and is a competitive factor for the Gross Domestic Product. In order to comply with this condition, the Encouragement Law prescribes various requirements regarding industrial enterprises.
C. | Tax rates applicable to the Company: (cont:)
As for industrial enterprises, in each tax year during the benefit period, one of the following conditions must be met:
| 1. | The industrial enterprise's main field of activity is biotechnology or nanotechnology as approved by the Head of the Administration of Industrial Research and Development, prior to the approval of the relevant program.
| 2. | The industrial enterprise's sales revenues in a specific market during the tax year do not exceed 75% of its total sales for that tax year. A "market" is defined as a separate country or customs territory.
| 3. | At least 25% of the industrial enterprise's overall revenues during the tax year were generated from the enterprise's sales in a specific market with a population of at least 12 million.
Accelerated depreciation: The Subsidiary is eligible for deduction of accelerated depreciation on buildings, machinery and equipment used by the beneficiary enterprise at a rate of 200% (or 400% for buildings) from the first year of the asset's operation. Conditions for the entitlement to the benefits: The abovementioned benefits are conditional upon the fulfillment of the conditions stipulated by the Encouragement Law, regulations promulgated thereunder, and the Ruling with respect to the beneficiary enterprise. Non-compliance with the conditions may cancel all or part of the benefits and refund of the amount of the benefits, including interest. The management believes that the subsidiary is meeting the aforementioned conditions. Amendment to the Law for the Encouragement of Capital Investments, 1959: In December 2010, the Knesset passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation) 2011 (the "Amendment"), which prescribes, among other things, amendments to the Encouragement Law. The Amendment became effective as of January 1, 2011. According to the Amendment, the benefit tracks in the Encouragement Law were modified and a flat tax rate applies to the Company's entire preferred income under its status as a preferred company with a preferred enterprise. Commencing as of the 2011 tax year, the Company will be able to opt to apply (the waiver is non-recourse) the Amendment and from the elected tax year and onwards, it will be subject to the amended tax rates that are: 2011 and 2012 - 15% (in development area A - 10%), 2013 and 2014 - 12.5% (in development area A - 7%) and in 2015 and thereafter - 12% (in development area A - 6%). The Subsidiary has examined the effect of the adoption of the Amendment on its financial statements, and as of the date of the publication of the financial statements, the Subsidiary estimates that it will not apply the Amendment. The Subsidiary's estimate may change in the future.
D. | Carryforward losses for tax purposes
As of June 30, 2012, the Company had U.S. federal net operating loss carryforward for income tax purposes in the amount of approximately $16,409. Net operating loss carryforward arising in taxable years, can be carried forward and offset against taxable income for 20 years and expiring between 2021 and 2032. Utilization of U.S. net operating losses may be subject to substantial annual limitations due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization. The Subsidiary in Israel has accumulated losses for tax purposes as of June 30, 2012, in the amount of approximately $20,551, which may be carried forward and offset against taxable business income and business capital gain in the future for an indefinite period. Deferred income taxes: Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows:
|  | June 30, |
|  | 2012 |  |  | 2011
Deferred tax assets: |  |  |  |  |
U.S. net operating loss carryforward |  | $ | 5,806 |  |  | $ | 4,750 |
Israeli net operating loss carryforward |  |  | 5,168 |  |  |  | 4,559 |
Allowances and reserves |  |  | 111 |  |  |  | 96 |
Total deferred tax assets before valuation allowance |  |  | 11,085 |  |  |  | 9,405 |
Valuation allowance |  |  | (11,085 | ) |  |  | (9,405 | )
Net deferred tax asset |  | $ | - |  |  | $ | - |
As of June 30, 2011 and June 30, 2012, the Company has provided valuation allowances in respect of deferred tax assets resulting from tax loss carryforward and other temporary differences, since they have a history of operating losses and current uncertainty concerning its ability to realize these deferred tax assets in the future. The Company accounts for its income tax uncertainties in accordance with FASB ASC No. 740 which clarifies the accounting for uncertainties in income taxes recognized in a company's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of June 30, 2011 and 2012, there were no unrecognized tax benefits that if recognized would affect the annual effective tax rate. Reconciliation of the theoretical tax expense (benefit) to the actual tax expense (benefit): In 2010, 2011 and 2012, the main reconciling item of the statutory tax rate of the Company (25% to 35% in 2010, 24% to 35% in 2011 and 25% to 35% in 2012) to the effective tax rate (0%) is tax loss carryforwards, Stock -based compensation and other deferred tax assets for which a full valuation allowance was provided.

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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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