NOTE 14:- TAXES ON INCOME

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA makes broad and complex changes to the Code. The changes include, but are not limited to:

A corporate income federal tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 ("Rate Reduction");

The transition of U.S. international taxation from a worldwide tax system to a territorial system by providing a 100 percent deduction to an eligible U.S. shareholder on foreign sourced dividends received from a foreign subsidiary;

A one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017; and

Taxation of GILTI earned by foreign subsidiaries beginning after December 31, 2017. The Global Intangible Low-Taxed Icome GILTI tax imposes a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

Corporate tax rates:

Israeli companies are generally subject to corporate tax on their taxable income. In 2020, 2019 and 2018 the corporate tax rate in Israel is 23% (in 2017 and 2016, the corporate tax rate was 24% and 25%, respectively).

In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23% effective from January 1, 2018. Capital gains derived by an Israeli company are subject to the prevailing corporate tax rate.

Taxable income of the Company's subsidiary in Luxemburg, Switzerland and the United States may be subject to the following statutory federal (approximate) tax rates:

	Year ended December 31,
	2020			2019			2018

Luxemburg		29	%		29	%		29	%
Zurich, Switzerland		21	%		21	%		21	%
Geneva, Switzerland		14	%		24	%		24	%
United States		21	%		21	%		21	%
Germany		16	%		16	%		16	%

Tax assessments:

The Company has final tax assessmentsin Israel through the tax year 2015.

The Company is currently under tax assessment valuation for tax years 2016 through 2019.

Deferred tax assets and liabilities:

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.

Deferred tax assets and liabilities mainly derive from the acquisitions of commercial buildings in Switzerland. The deferred taxes are computed at the average tax rate of 23%, based on the corporate income tax in Switzerland, which is the tax rate that will be in effect when the differences are expected to reverse.

Significant components of the Company and its subsidiary deferred tax assets are as follows:

	December 31,
	2020			2019
Deferred tax assets:

Net operating losses and other temporary differences	$	31,271		$	28,941
Lease provision		1,622			1,466
Other		199			190

Deferred tax assets		33,092			30,597

Deferred tax liabilities:

Land		(5,734	)		(5,437	)
Building		(10,373	)		(10,020	)
Other		(3,553	)		(3,331	)
Distributable proceeds		(809	)		-

Deferred tax liabilities		(20,469	)		(18,788	)

Valuation allowance		(27,718	)		(25,610	)

Deferred tax liabilities, net	$	(15,095	)	$	(13,801	)

Net operating losses carry-forward:

Through December 31, 2020, Optibase Ltd. had net operating losses carry-forward for tax purposes in Israel of approximately $ 72,000 which may be carried forward and offset against taxable income in the future, for an indefinite period.

As of December 31, 2020, Optibase Inc. had U.S. federal net operating loss carry-forward of approximately $ 57,000 that can be carried forward and offset against taxable income for 20 years, no later than 2040. Utilization of U.S. net operating losses may be subject to the substantial annual limitation 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. Based upon the weight of available evidence, which includes the Company's historical operating performance and the recorded cumulative net losses in all prior fiscal periods, the Company has provided a full valuation allowance against it Israeli and U.S. deferred tax assets.

Reconciliation of the theoretical tax expenses to the actual tax expenses:

A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to the income of the Company and the actual tax expense as reported in the statements of operations is as follows:

	Year ended December 31,
	2020			2019			2018

Income before taxes as reported	$	13,657		$	3,920		$	3,525

Theoretical tax benefit computed at the statutory rate 23%		3,141			902			811
Income tax at rate other than the Ltd. statutory tax rate		(1,150	)		101			52
Tax adjustments in respect of currency translation		-			7			2
Adjustment of deferred tax balances following a decrease in statutory tax rates		(572	)		-			-
Deferred taxes on losses and other temporary differences for which valuation allowance was provided		842			465			446
Taxes for previous years		(23	)		(40	)		47
Other non-deductible expenses		(76	)		37			106

Income tax expense	$	2,162		$	1,472		$	1,464

Income before taxes on income consists of the following:

	Year ended December 31,
	2020		2019			2018

Domestic	$	594	$	(179	)	$	(2,515	)
Foreign		13,063		4,099			6,040

	$	13,657	$	3,920		$	3,525

Income tax expenses are comprised as follows:

	Year ended December 31,
	2020			2019			2018

Current	$	2,184		$	1,612		$	1,637
Deferred		(22	)		(140	)		(173	)

	$	2,162		$	1,472		$	1,464

Domestic	$	809		$	-		$	-
Foreign		1,353			1,472			1,464

	$	2,162		$	1,472		$	1,464