4.

In this Law - 
"scheme" means an annual or multi-annual research-and- development scheme as a result of which any know-how, processes or methods are to become available for the manufacture in a new product or a substantial improvement in an existing product or the development in a new process or a substantial improvement in an existing process; 
 
"product" means any tangible property or know how including  production processes and a computer program; 
 
"new product" means a product the commercial manufacture or use of which is made possible by the discovery of  know-how, processes or methods which were previously  unknown or not generally available; 
 
"research" means planned investigation with a view to discovering  new know-how in the expectation that it will be useful in developing a new product or new process or in substantially improving an existing product or process; 
 
"development" means the application of the findings of  research, or any other know-how, to a scheme aimed at the manufacture of a new product or the development of a new process or a substantial improvement in an existing product or process and includes the consolidation or reexamination of the features of a scheme, the preparation of programs and designs, the construction of a prototype and the operation of an experimental model or a pilot plant, provided that the stages subsequent to the testing of the experimental model or to the trying out of the process under experimental conditions or to the operation of the pilot plant are not  regarded as development; 
 
"manufacturer" means a corporation registered in Israel which, as a result of the implementation of a scheme. is to manufacture in its enterprise in Israel a new product or an existing product in which a substantial improvement has been made; 
 
"research and development expenses" means expenses incurred in carrying out research and development under an approved scheme but does not include expenses which the Ministers, with the knowledge of the Economic Committee of the Knesset, have stipulated in the Regulations that they are not to be taken into account.

5.

An "Industrial Research-and-Development Administration" (hereinafter - "the Administration"), is hereby established, to work for the achievement of the object of this Law and  the encouragement of investment in industrial research and development. 
 

6.

The authorities of the Administration are - 
(1) the Head of the Administration; 
(2) the Research Committee; 
(3) the Council of the Administration (hereinafter - "the Council"). 
 

7.

The Chief Scientist of the Ministry of Industry and Trade shall be the Head of the Administration. The Head of the Administration shall, ex officio, be a member and the chairman, of the Research Committee and a member of the Council. 
 

8.

(a) The Head of the Administration is charged with the implementation of the decisions of the Research Committee and the Council and shall act in their name. 
 
(b) Everything to be submitted to the Research Committee, the Council or the Ministers shall be submitted through the Head of the Administration and every notice on behalf of any of them shall be delivered by him. 
 

9.

(a) The Research Committee shall, in addition to the Head of the Administration, include the following members: 

(1) four representatives of the Ministry of Industry and Trade appointed by the Minister of Industry and Trade; 
(2) two representatives of the Ministry of Finance appointed by the Minister of Finance; 
(3) three representatives of the public appointed by the Ministers, provided that two of them shall be industrialists.

(b) The appointment shall be for a period not exceeding three years; a member whose period of appointment has expired may be reappointed. 
 
(c) Where the votes of the Research Committee are evenly divided, the Head of the Administration shall have a casting vote. 
 
(d) The members of the Research Committee shall also be members of the Council; 
 
(e) Those appointing a member to  the Research Committee shall  appoint a permanent deputy for him, 
 
(f) A notice of the appointment, composition and address of' the Research Committee shall be published in Reshumot. 
 

10.

(a) The functions of the Research Committee shall be - 

(1) to decide upon the approval of schemes (hereinafter - "approval") within the framework of the State Budget; 
(2) to prescribe procedures and times for submitting applications for the approval of a scheme; 
(3) to prescribe conditions for the grant of benefits; 
(4) to provide and disseminate information as to investments in industrial research and development in Israel; 
(5) to recommend to any competent authority to grant - within the framework of the enactments which apply in its sphere of competence, or with the implementation of which it is charged, and within the criteria prescribed by the Research Committee for the approval of schemes - any reduction, relaxation, license or loan likely to assist in achieving the object of this Law. 

(b) The Research Committee shall prescribe rules of procedure for its deliberations and work in so far as these are not pre-scribed by the regulations. 
 

11.

(a) The Ministers shall appoint to the Council, in addition to the members of the Research Committee, five persons recommended  by organizations of industrialists which in the opinion of the Ministers are representative for the purposes of this Law, three members of the scientific community, four State employees and three members of the public. 
 
(b) A member of the Council shall be appointed for a period not exceeding three years; a member whose period of  appointment has expired may be reappointed. 
 

12.

The function of the Council shall be to advise the Ministers  on any matter relating to achieving  the object of this Law and on anything relating to the development of science-intensive industries and to the determination of multi-annual national targets for the advancement of the research and development required for the development thereof, including the establishment of a scientific and technological infrastructure for that purpose and the procurement of know-how and technologies from outside sources. 
 

13.

The Council shall determine the procedures for its deliberations and work in so far as these are not prescribed by the regulations. 
 

14.

(a) Nothing of the proceedings of the Research Committee or the Council and no material delivered to either of them shall be disclosed save with the consent of the Head of the Administration, the Chairman of the Council or the Ministers. 
 
(b) A person to whom any documents are delivered on behalf of the Research Committee or the Council, for the purpose of giving an opinion or for any other purpose, stall not disclose the contents of such documents to another save by authorization from the Head of the Administration. 
 
(c) The Head of the Administration may, with the approval of the Ministers, prescribe rules for the maintenance of the secrecy of the schemes, their approval and the monitoring of  their implementation. 
 

15.

A member of the Research Committee or the Council shall not take part in the deliberations thereof where his other activities may create a conflict of interests with the matter under consideration or where he has a personal interest therein.

16.

(a) An applicant for the approval of a scheme shall submit to the Research Committee a detailed description of the scheme he intends to carry out, together with particulars of the investment required and the sources of financing, a survey of the existing know-how on the subject and the possibilities of obtaining it, an exposition of the novelty of the product to be developed and its advantages over other products, particulars of how he proposes to manufacture the product if the anticipated results of the research and development are achieved, particulars of the owners of rights in the know-how, manufacture or marketing, and a survey of the possibilities of marketing the product; the applicant shall deliver to the Committee any such other particulars or document requested by it as  required for an examination of the scheme. 
 
(b) An application may be submitted by a manufacturer, and, in special cases, with the approval of the Research Committee, by a person other than a manufacturer; 
 
c) Approval shall not be granted unless it is proved to the satisfaction of the Committee that appropriate arrangements have been made to ensure that the manufacture is carried out exclusively in Israel. 
 
(d) The provisions of subsection c) shall not apply where the grant has been awarded to a scheme being carried out as part of an international cooperation agreement on research and development in industry to which Israel is a part. 
 

17.

a) The Research Committee shall not approve a scheme or any part thereof unless it has received an opinion on the scheme from a professional examiner empowered to this end by the Head of the Administration and it appears to it that the scheme has a reasonable prospect of leading to the manufacture of a new product and to its marketing for export. 
 
(b) The Research Committee shall not approve a scheme in the event of one of the following scenarios - 

(1) the applicant proposes to carry it out on the order of another person for full or partial payment, in consideration  for full or partial rights of ownership in the know-how or manufacture; 
(2)(a) the applicant is to receive towards the implementation of the scheme, assistance from the Government, otherwise than in accordance with the provisions of this Law; 
(2)(b) notwithstanding the provisions of subsection (a), the Research Committee shall approve a scheme in the instances and on the conditions to be prescribed by the Ministers with the approval of the Knesset Economics Committee; 
(3) the scheme concerns the carrying out of research ap-proved as scientific research under the provisions of the Income Tax Law (Benefits for Investment in Securities the Consideration for Which is Earmarked for Scientific Research, 5744-1983).

c) Where a scheme or part thereof has been financed by another, otherwise than as part of an order as described in subsection (b)(1), the amount of such financing shall be deducted from the approved budget of the scheme; 
 
(d) Where the Research Committee has approved a scheme or part thereof (hereinafter - "approved scheme"), a written certificate to this effect, signed by the Head of the Administration, shall be issued; 
 
(e) Where the Research Committee has not approved any scheme or part thereof, the Head of the Administration shall notify the applicant of the reasons, in writing, within fifteen days of the date of the decision. 
 

18.

(a) Any change in an approved scheme, with respect to the subject content of the research and development, or the amount of expenditure required for the implementation of the scheme, or with respect to the requirement for the manufacturing of the product in Israel, or in any other respect, shall require the approval of the Research Committee. 
 
(b) The Research Committee may empower any person to approve, after consultation with the professional examiner and in accordance with rules prescribed by it - 

(1) a change in an approved scheme arising out of changes in the prices of equipment without changing the quantity or type of the equipment; 
(2) a change in an approved scheme arising out of an unforeseen variation in wages, provided that it shall not approve a change exceeding the change which occurs in the average national wage during the period in question; 
(3) a change in the expenditure sections of the approved scheme, provided the overall budget framework approved for the scheme is kept intact; 
(3a) a monetary addition to the approved program that does not exceed ten per cent of the overall amount approved for the scheme; 
(4) a variation in the dates of implementation of an approved scheme;

(c) The provisions of section 17 stall apply mutatis mutandis to the approval of a change to the scheme. 
 

19.

(a) The Research Committee may at its discretion, prescribe preconditions in its approval for the coming into force thereof and conditions in connection with the implementation of the scheme. 
 
(b) The following conditions shall apply to every approved scheme: 

(1) The research and development shall be carried out by the applicant or by a person designated in the scheme by the applicant as the person to whom the research and development or part thereof is to be entrusted for implementation; the replacement of the person carrying out the research and development shall require the approval of the Research Committee and the replacement of the chief researcher shall require the consent of the Head of the Administration; 
(2) the know-how derived from the research and development, which under the approved scheme is not the product to be manufactured but serves towards the product's manufacture, shall not be transferred to another; 

(c) notwithstanding the provisions of subsection (b), the Research Committee may approve a change of personnel in the person carrying out the research and development or a transfer of the know-how to another, provided that the duties under this law and under the terms of the approval apply to the recipient of the know-how, including the obligation not to transfer the know-how to another without the consent of the Research Committee, and including the obligation to pay royalties; 

(d)  the product to be developed as a result of the research and development shall be manufactured exclusively in Israel; however the Research Committee may, in order to realize the objectives of this law, in certain instances and for reasons to be noted, authorize, in the course of a scheme or after its conclusion, the transfer outside Israel of part of the manufacturing rights of the product, in a manner and under conditions that it shall prescribe. 
 

20.

The person who has been given an approval shall submit a report on the progress of the research and development and a financial report on the research expenses, at the dates, and in accordance with  rules to be prescribed by the Research Committee. 
 

21.

(a) The person who has been given an approval shall pay royalties to the Treasury from any income deriving from the product developed under the scheme, including services which are associated with the product or which form a part of the product, whether the income has accrued to the person who was given the approval or whether to an associated person or corporation;  for these purposes - 

"an associated person or corporation" - one of the following: 

(1) a corporation, the control of which, either directly or indirectly, is held by the person who has been given the approval; 
(2) one who controls, either directly or indirectly, the person who has been given the approval; 
(3) a corporation the control of which, either directly or indirectly, is held by one to whom the provisions of subsections (1) or (2) apply, or held by one who has received an approval in the manner set out in subsection (4); 
(4) one who has received an approval to manufacture the product from one who was given the approval or from one to whom subsections (1) to (3) apply;

"control" - as according to its meaning in The Securities Law 5728-1968. 
"income" - as the Ministers will prescribe in the regulations. 
 
(b) All the amounts of royalties paid as aforesaid shall be used for the encouragement of industrial research and development as determined by the Research Committee. 

(c) The royalties shall be paid at such rates and according to such rules as the Ministers shall prescribe by regulations after consultation with the Research Committee. 

(d) The royalties shall be collected in like manner as tax is collected, and the Taxes (Collection) Ordinance shall apply as if the royalties were a tax within the meaning of that Ordinance. 
 

22.

(a) Where it appears to the Head of the Administration that the research and development is not progressing in accordance with the scheme or that the results of the research and development at the stage it has reached indicate that the prospects of the success of the scheme have substantially diminished, he may, after hearing the person to whom the approval was given, recommend that  the Research Committee revoke the approval or vary the approved scheme. 

(b) The Research Committee may accept the recommenda-tion of he Head of the Administration, in whole or in part, or reject it, or may give a different decision in the matter, including a decision under section 45(b). 

(c) Where a report has not been submitted as provided in section 20, the Head of the Administration may regard the research and development as not progressing in accordance with the approved scheme and may act as provided in subsection (a). 
 

23.

(a) A person who considers himself aggrieved by a decision of the Research Committee under section 17, 22 or 45 may lodge an objection with the Appeals Committee within forty-five days from the day on which the decision was communicated to him. 

(b) The objection shall be in writing, setting out the reasons for it. 
 

24.

(a) The Ministers shall appoint an Appeals Committee of five from among the members of the Council who are not members of the Research Committee; three of them shall be State employees and two members of the public. 

(b) Three members of the Committee shall form a quorum for its deliberations, among them being the chairman, a State employee and a member of the public. 
 

25.

The Appeals Committee shall determine the procedure of its deliberations and work in so far as this is not provided for in the regulations.

26.

A person who has been given an approval under this Law shall be entitled to receive a grant if he meets all the conditions of the approval of the scheme and complies with the provisions of the rules set by the Research Committee under this Law. 
 

27.

A grant shall not be paid more than once in respect of any one scheme.

28.

(a) A grant shall be proportionate to the research-and-development expenses, as prescribed in the Schedule. 
 
(b) The Ministers may, with the approval of the Finance Committee of the Knesset, vary the rates and conditions specified in the Schedule. 
 

29.

The Head of the Administration may, in accordance with rules prescribed by the Research Committee, demand security to ensure the return of the grant, or benefit as applicable, in accordance with sections 22 and 47 or otherwise to ensure compliance with the provisions of this Law or the conditions on which the scheme was approved.

30.

The grant shall be paid not later than thirty days after the day on which the recipient of the approval proves, to the satisfaction of the Head of the Administration, that he has carried out that part of the approved scheme and incurred the expenditure to which the application for the grant relates. 
 

31.

(a) Notwithstanding the provisions of section 30, the Head of the Administration may, in accordance with rules  prescribed by the Research Committee, approve the  payment of  an advance on a grant. 

(b) For the purposes of sections 26, 29, 44, 45, 46 and 47, an advance on a grant shall be deemed to be a grant. 
 

Rules

32.

The Research Committee may prescribe rules for the implementation of the provisions of this chapter, including procedures for making application for a benefit, the particulars to be contained in the application and the documents to be attached to it, the security required for the receipt of a grant, the manner and times of the payment of a grant (by installments or at one time), as well as rules for withholding part or all of the grant, as the Ministers shall prescribe. 
 

Loans

33.

(a) The Research Committee may, on the application of the applicant, decide that the applicant or a person who invests in the scheme in his enterprise shall be given a loan instead of a grant under the provisions of this chapter . 

(b) The loan shall be given under a loan agreement with a bank approved for this purpose by the Minister of Finance; the bank shall place the loan at the disposal of the person entitled to it, at a rate proportionate to the research-and-development expenses of the approved scheme and on conditions prescribed by the Minister of Finance after consultation with the Minister of Industry and Trade. 

(c) A loan under this section shall not be given unless - 

(1) the applicant has shown that he is investing not less than ten per cent of the research-and-development expenses approved under the approved scheme out of his own capital which does not derive from loans; 
(2) it has been proved to the satisfaction of the Head of the Administration that the raising of funds from investors in or outside Israel for the implementation of the approved scheme was carried out properly and on the basis of an appropriate disclosure of the risks and prospects.

34.

(a) The rate of  tax on such income of a scientific worker as is derived from employment in an approved scheme, or in another research and development scheme which the Head of the Administration has approved for these purposes, shall not exceed thirty-five per cent of such income; such income shall be deemed the highest bracket of his chargeable income; this benefit shall not be granted for a period exceeding eighteen months. 

(b) In this section, "scientific worker" means an employee who, under a collective agreement made in Israel and applying to him, is entitled to a sabbatical year with pay, who in the sabbatical year was employed within the framework of an approved scheme, or in a research and development scheme that the Head of the Administration approved for these purposes, under this Law, and who, prior to such employment was not an employee of the employer concerned. 
 

35.

Where it appears to the research Committee that an approved scheme has been implemented and that the  manufacturer intends to begin manufacturing and marketing a product resulting from the implementation of the scheme, it may approve the grant of a loan to the manufacturer. The provisions of section 33 shall apply mutatis mutandis to such a loan. 
 

36.

There is hereby established a "Fund for the Promotion of Technology" (hereinafter referred to as "the Fund"). 
 

37.

The object of the Fund is to further technology in Israel and to assist the expansion of industrial research and development activity, inter alia by - 
(1) assisting the establishment of a technological infrastructure, designed to benefit a particular industrial sector or industry as a whole, in spheres in which such an infrastructure does not at present exist or is inadequate; 
(2) conducting research, surveys and economic and technological inquiries in order to assist the shaping of a government policy in aid of industrial research and development; 
(3) assisting the training of manpower for science-intensive industries. 
 

Receipts of Fund

38.

The receipts of the Fund shall be - 
(1) an amount at the rate of one per cent of every grant or loan given under this Law, to be deducted at the time of payment to the person entitled to receive the grant or loan; 
(2) an amount equal to the amount deducted under paragraph (1) which shall be appropriated from the State Budget; 
(3) moneys and appropriations from any person for the advancement of its objects and activities. 
 

39.

All the receipts of the Fund shall be earmarked for activities approved by its management within the framework of its budget and objectives. 
 

40.

(a)  The Fund shall be managed by a management of five members (hereinafter - "the management"). namely - 

(1) the Head of the Administration. who shall be the chairman of the management; 
(2) an employee of the Ministry of Industry and Trade appointed by the Minister of Industry and Trade; 
(3) an employee-of the Ministry of Finance appointed by the Minister of Finance; 
(4) two members appointed by the Ministers on the recommendation of industrialists' organizations as specified in section 11.

(b) A member of the Management shall be appointed for a period not exceeding three years. A member whose period of appointment has expired may be reappointed. 
 

41.

 The Management shall prescribe rules of  procedure for deliberations and work in so far as such are not prescribed by  the regulations.

42.

The Government may, on the recommendation of the Minister of Industry and Commerce, establish funds operated jointly by it and the governments of other states (hereinafter - "joint funds"), the object of which shall be the encouragement of cooperation in research and development between industrial enterprises in Israel and in other states with a view to furthering the objects of this Law.

43.

A person who has been given an approval shall supply the Head of the Administration, at his request, with any information, documents and other evidence relevant to the implementation of the approved scheme, the fulfillment of the conditions of the approval and the determination of the rate of benefits. 
 

44

The provisions of this Law shall apply notwithstanding anything provided for in any other enactment; no benefit shall be granted unless the provisions of this Law, the regulations and rules thereunder, of the approved scheme and every condition of the approval, have been complied with, and the applicant has proved that he keeps acceptable books, within the meaning of the Income Tax Ordinance , and, if he has any other business, that he keeps a separate set of accounts for the purpose of the approved scheme. 
 

45.

(a)  Where it appears to the Head of the Administration that a person who has received an approval has not complied with a provision of this Law or the regulations or rules thereunder or has not complied with the approved scheme or any condition of the approval, he may send the recipient of the approval notice of his intention to recommend that the Research Committee consider suspension or revocation of the approval, prospectively or retrospectively. 

(b) Where such a notice as referred to in subsection (a) has been given, the Research Committee may - 

(1) authorize the continued implementation of the scheme, subject to further conditions or unconditionally; 
(2) suspend or revoke the approval, prospectively or retroactively; 
(3) withhold benefits pending further clarification; 
(4) request the return of benefits granted.

 46.

(a) Where it appears to the Research Committee that approval was obtained on the basis of false or knowingly misleading statements, it shall revoke the approval retroactively to the day on which it was given. 

(b) A decision of the Research Committee under this section shall be appealable to the District Court within sixty days from the day on which notice of the decision is delivered. Where an appeal is filed, the approval shall be regarded as suspended until the day on which the decision on the appeal is given. 
 
(c) The Minister of Justice may make regulations as to the procedure of an appeal under this section. 
 

47.

(a) A person requested under sections 22 or 45 to return benefits granted to him shall comply with the request within ninety days from the date of the notice, or within such longer period as may be fixed in the notice, adding linkage differentials and interest, within the meaning of the Adjudication of' Interest and Linkage Law, 5721-1961, from the date of receipt of the benefits, but the Research Committee may, for special reasons which it shall record, waive all or part of the interest. 

(b) Where a corporation has received benefits under this Law and a winding-up order or receivership order is made against it or it resolves upon a voluntary winding-up before it has implemented the whole of the approved scheme and fulfilled all the conditions contained in the approval, it shall be deemed to have undertaken to return the benefits before the making of the winding-up order or receiving order or the passing of the resolution, unless the Research Committee decides that they shall not be returned or shall be returned only in part; the same shall apply in the case of an individual against whom a receiving order is made in bankruptcy proceedings. 
Nothing in this subsection shall be taken as derogating from the right of the State to receive royalties under section 21, from any income within the meaning of the term in that section, received after a winding up order, receivership order or a decision on voluntary winding up. 

(c) Where an approval is revoked under section 46, the recipient of the approval shall return the benefits he has received within sixty days from the day on which notice of the revocation is sent to him, together with linkage differentials and interest, within the meaning of the terms in the Adjudication of interest and Linkage Law, 5721-1961, from the date of receipt of the benefits. 
 
(d) The provisions of this section shall not derogate from any other law, and where a condition concerning the payment of royalties or the prohibition on the transfer of know-how is infringed, the provisions of this section shall not affect the obligation of. the person to whom the approval was granted to comply with such a condition. 
 

Penalties

47.

(a) One who, without the authorization of the Research Committee or in violation of the conditions of such an authorization, by act or omission,  transferred or made the transfer possible outside Israel of know-how developed as part of an approved scheme or in consequence of its implementation, shall be liable to three years imprisonment. 
 

48.

Rules prescribed by the Research Committee under this Law shall be published in Reshumot. 
 

49.

Notice of appointments under this Law shall be published in  Reshumot. 
 

50.

The Head of the Administration may, with the approval of the Research Committee, delegate any of his powers under- this Law, except the power to serve as member and chairman of the Research Committee and as member of the Council. 
 

51.

The powers conferred by this Law shall not derogate from powers under any other enactment. 
 

Regulations

52.

The Ministers may make regulations on any matter relating to the implementation of this Law. 
 

Commencement

53.

This Law shall come into force on the 8th Tevet, 5755 (1st January, 1985).