103. In this Part each term shall have the meaning it has in Part Five or in the Land
Appreciation Tax Law, as the case may be, unless there is an explicitly
different provision in this Part;
(1) the transfer of all assets and obligations of one or several companies
(hereafter: transferor company) to another company (hereafter: merged
company) and the transferor company's liquidation without winding up,
in accordance with a merger Order or in accordance with Chapter One
of Part Eight of the Companies Law;
(2) for the purposes of section 103T, a transfer of at least 80% of the rights
in a company or in each of the companies (hereafter: transferee
company) to another company in consideration of shares that will be
allocated in the other company, on condition that the holders of rights
and the parties affiliated with them who transferred their rights in the
transferee company transferred all their rights in the said transfer to the
other company (hereafter the other company shall also be called a
merged company);
(3) the performance of a succession of mergers;
"asset" any property, whether real or movable, and every right or benefit,
contingent or vested, whether in Israel or abroad;
"merger Order" an Order made under section 351 of the Companies Law;
"date of merger"
(1) for purposes of a merger under a merger Order the end of the tax
year in which the merger Order was made, or the end of the preceding
tax year, on condition that that was not before the date on which the
petition for the merger Order was submitted;
(2) for purposes of a merger under Chapter One of Part Eight of the
Companies Law the end of the tax year in which the merger took
place, on condition that that was not earlier than the decision by the
General Meeting of each of the merging companies under section
320(a) of the Companies Law;
(3) for purposes of a merger under section 103T the date of the 148
exchange of shares;
"approved merger" a merger approved by the Court under section 321 of
the Companies Law or a merger which by a decision of the Court under
section 319 of the Companies Law must not be delayed and the
implementation of which on the date set by the Court must not be prevented;
"the required period"
(1) in respect of a merger under paragraph (1) of the definition of "merger"
the longer of the following two periods: a period of two years that
begins on the merger date, or a period that began on the merger date
and ended one year after the end of the tax year in which the merger
Order was issued or the merger was approved, as the case may be;
(2) in respect of a merger under paragraph (2) of the definition of "merger"
the period that began on the merger date and ended two years after
the end of the tax year in which the merger date occurred;
"succession of mergers" one or more additional mergers (hereafter:
additional merger), in which a company that participated in a previous merger
participates and which is carried out during the required period of the
previous merger, on condition that the following two conditions apply:
(1) the conditions for entitlement under section 103C are met by each of
the merging companies;
(2) the conditions prescribed under section 103C(6) would also have been
met, if the first merger in the succession of mergers and each additional
merger had been carried out as a single merger on the date of the
additional merger; for that purpose the market value of each of the
companies that participated in the merger on the date of the first
merger and on each of the additional merger dates shall be taken into
account, adjusted at the rate of the index increase from the date of the
merger in which each of the companies participated until the date of the
last additional merger;
"associated party", of a body of persons (in this definition: body corporate) or
of an individual a person for whom one of the following holds true:
(1) a relative, as defined in section 76;
(2) a controlling member of the body corporate;
(3) a body of persons, of which the body corporate or the individual is a
controlling member;
(4) the body corporate and the body of persons have the same controlling
"right in a body of persons" a right in a body of persons, which gives one
of the rights enumerated below, whether assigned in or under the charter and
by-laws of the body of persons, or by agreement with a member of the body
of persons:
(1) membership in a body of persons or a right to its assets upon winding
up, or a right to its profits, or the right to manage it or the right to vote in
it, as well as any other right in the body;
(2) a right of choice or a right to claim in respect of any of the rights
specified in paragraph (1), from the body or from the owner of any of
the said rights;
(3) the right to order directly or indirectly the holder of any right
specified in paragraphs (1) and (2) how to exercise his right;
"split" the transfer of assets and obligations of one company (hereafter:
split company) to one or more other companies (hereafter: new company);
"capital reduction Order" the Order of a competent Court under the
Companies Ordinance, which allows a company to reduce its capital;
"market value" the amount which could have been obtained by a sale by a 149
willing seller to a willing buyer, between whom there are no special
"involuntary sale" a sale which is one of the following:
(1) an inheritance;
(2) a sale as part of involuntary winding up proceedings under the
Companies Ordinance;
(3) a sale under bankruptcy proceedings;
(4) some other kind of sale prescribed by the Minister of Finance in
"controlling member" as defined in section 3(i)(1)(c);
"structural change" a merger, a split or a transfer of assets against shares,
all according to this Part.

Applicability to cooperative societies, trust funds, nonprofit societies,
Government companies, Government subsidiaries and research and
development intensive companies
103A. (a) The provisions of this Part shall also apply to structural change in
cooperative societies and nonprofit societies, or to a structural change
in which one party is a cooperative society or a nonprofit society, and
also to trust funds of the same type, all mutatis mutandis and with
additional changes that the Director will prescribe.
(a1) The Director may, in consultation with the Director of the Government
Companies Authority, certify that the provisions of this Part apply to
Government companies and Government subsidiaries with changes he
prescribed, including the non-applicability of part of the provisions of
this Part, on condition that the proportion of the direct or indirect holding
of the Government or of the Development Authority, within its meaning
in the Development Authority (Transfer of Assets) Law 5710-1950, of
rights to profits or of rights to assets upon liquidation of the said
companies is not less than 90% on the date of the structural change; in
this subsection: "Director of the Companies Authority",
"Government company" and "Government subsidiary" as defined
in the Government Companies Law 5735-1975.
(b) It is also permissible to prescribe, in regulations with approval by the
Knesset Finance Committee, that provisions of this Part apply to
structural change in research and development intensive companies,
as shall be defined in the regulations, with the changes specified there.

Power to change conditions
103A1.(a) The Minister of Finance may, in regulations with approval by the
Knesset Finance Committee, increase every ratio set in section 103C,
change the proportions of holdings required in the same section, or
shorten the required period, all in respect of the conditions that qualify
for entitlement to the tax benefits under this Part; regulations under this
section may be made for certain categories of structural change or for
certain categories of structural change in certain companies, taking the
said companies' unique position in the economy into consideration.
(b) Notwithstanding the provisions of the definition of "date of merger" in
section 103, and notwithstanding the provision of section 105C(9), the
Director may designate a different merger date or a different date of a
split, on conditions that he prescribed.