The Company and its subsidiaries are assessed for income tax purposes on a separate basis. Each of the subsidiaries is subject to the tax rules prevailing in the country of incorporation.

On December 22, 2016 the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. The first step will be to a rate of 24% as from January 2017 and the second step will be to a rate of 23% as from January 2018.

Current taxes for the reported periods are calculated according to the enacted tax rates presented above, subject to the reduced tax rate under the Law for the Encouragement of Capital Investment discussed below.

(2)Benefits under the Law for the Encouragement of Capital Investments (hereinafter - “the Encouragement Law”)

On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments – 1959 (hereinafter – “the Amendment”).

On August 5, 2013 the Knesset passed the Law for Changes in National Priorities (Legislative Amendments for Achieving Budget Objectives in the Years 2013 and 2014) – 2013, which determined that as of 2014 tax year the tax rate on preferred income will be 9% for Development Area A in which the Company is situated.

On December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016, by which, inter alia, preferred enterprise in development area A will be subject to tax rate of 7.5%.

In 2019 the Company filed a notice to the Israeli Tax Authorities regarding the implementation of the preferred enterprise its preferred income, beginning 2019 (instead of Beneficiary). As the Company is located in Development Area A, the applied corporate tax rate is 7.5%.

F - 34

Camtek Ltd. and its subsidiaries

Notes to the Financial Statements as at December 31, 2020

(Amounts in thousands, except per share data)

Note 16 - Income Taxes (cont’d)

B.Details regarding the tax environment of the Israeli companies (cont’d)

(b)During the years 1998-2006 the company was subject to tax in according to the Approved and Beneficiary Enterprise under the Law for the Encouragement of Capital Investments. As such, the Company has income that was exempt from tax. If the Company will distribute dividend from the exempt income the Company will be required to pay income tax on the amount of the dividend distributed at the tax rate that would have been applicable to it in the year the income was produced if it had not been exempt from tax.

The Company intends to indefinitely reinvest the amount of its tax-exempt income and not distribute any amounts of its undistributed tax exempt income as a dividend. Accordingly, no deferred tax liabilities have been provided on income attributable to the Company's Approved and Beneficiating Enterprise programs.

Out of Camtek's retained earnings as of December 31, 2020 approximately $22,252 are tax-exempt earnings attributable to its Approved Enterprise and approximately $3,383 are tax-exempt earnings attributable to its Beneficiating Enterprise. The tax-exempt income attributable to the Approved and Beneficiating Enterprises cannot be distributed to shareholders without subjecting the Company to taxes. If these retained tax-exempt profits are distributed, the Company would be taxed at the reduced corporate tax rate applicable to such profits (currently – up to 25% pursuant to the implementation of the Investment Law). According to the Amendment, tax-exempt income generated under the Beneficiating Enterprise will be taxed upon dividend distribution or complete liquidation, whereas tax exempt income generated under the Approved Enterprise will be taxed only upon dividend distribution (but not upon complete liquidation, as the tax liability will be incurred by the shareholders).

As of December 31, 2020, if the income attributed to the Approved Enterprise was distributed as a dividend, the Company would incur a tax of approximately $5,563. If income attributed to the Beneficiary Enterprise was distributed as dividend, or upon liquidation, the Company would incur a tax in the amount of approximately $845. These amounts will be recorded as an income tax expense in the period in which the Company declares the dividend.

F - 35

Camtek Ltd. and its subsidiaries

Notes to the Financial Statements as at December 31, 2020

(Amounts in thousands, except per share data)

Note 16 - Income Taxes (cont’d)

C.Details regarding the tax environment of the Non-Israeli companies

Non-Israeli subsidiaries are taxed according to the tax laws in their countries of residence under local tax laws and regulations.

D.Composition of income (loss) from continuing operations before income taxes and income tax expense (benefit)

	Year Ended December 31,
	2020		2019		2018
	U.S. Dollars (in thousands)
Income from continuing operations before income taxes:
Israel		20,430		20,783		18,746
Non-Israeli		2,969		1,990		2,015

		23,399		22,773		20,761

Income tax expense from continuing operations:
Current:
Israel		-		-		(306	)
Non-Israeli		670		424		635
		670		424		329
Deferred tax expense (benefit) from continuing operations:
Israel		943		1,351		1,867
Non-Israeli		8		175		(166	)
		951		1,526		1,701

		1,621		1,950		2,030

F - 36

Camtek Ltd. and its subsidiaries

Notes to the Financial Statements as at December 31, 2020

(Amounts in thousands, except per share data)

Note 16 - Income Taxes (cont’d)

E.Reconciliation of income tax expense at the statutory rate to actual income tax expense

The following is a reconciliation of the theoretical income tax expense, assuming all income is taxed at the statutory tax rate applicable to Israeli companies, and the actual income tax expense:

	Year Ended December 31,
	2020			2019			2018
	U.S. Dollars (in thousands)
Income (loss) from continuing operations before income taxes		23,399			22,773			20,761

Statutory tax rate		23	%		23	%		23	%

Theoretical income tax expense (benefit)		5,382			5,238			4,775

Increase (decrease) in income tax expense resulting from:

Change in valuation allowance		-			-			(346	)

Non-deductible expenses(*)		239			337			214

Differences between foreign currencies and dollar-adjusted financial statements, net		(739	)		(479	)		240

Tax rate differential		(3,251	)		(3,340	)		(3,072	)

Other		(10	)		194			219

Actual income tax expense (benefit)		1,621			1,950			2,030

(*)Including non-deductible share based compensation.

F - 37

Camtek Ltd. and its subsidiaries

Notes to the Financial Statements as at December 31, 2020

(Amounts in thousands, except per share data)

Note 16 - Income Taxes (cont’d)

F.Deferred tax assets and liabilities

The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and liabilities are presented below:

	December 31,
	2020			2019
	U.S. Dollars (in thousands)
Deferred tax assets:
Allowance for doubtful accounts		3			3
Deferred revenue		340			56
Accrued expenses		469			374
Net operating loss and tax credit carryforwards		644			1,036
Lease liability		170			192
Other temporary differences		344			119

Deferred tax asset		1,970			1,780

Deferred tax liabilities:
Property, plant and equipment		(618	)		(251	)
Right of use assets		(170	)		(192	)
Undistributed earnings		(700	)		(591	)
Total deferred tax liabilities		(1,488	)		(1,034	)

Net deferred tax assets		482			746

Deferred tax assets are recognized for the anticipated tax benefits associated with operating loss carryforwards, tax credit carryforwards and deductible temporary differences. If it is more likely than not that some or all of the deferred tax assets will not be realized, the deferred tax credits are reduced by a valuation allowance.

In assessing the realizability of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

At December 31, 2020 and 2019 the Company had a valuation allowance of $0.

As of December 31, 2020, the Company in Israel has a tax credit carryforwards of $531 that can both be carried forward indefinitely. The amount of the Israeli deferred tax assets (liabilities) considered realizable, however, could be revised in the near term if estimates of future taxable income are changed.

F - 38

Camtek Ltd. and its subsidiaries

Notes to the Financial Statements as at December 31, 2020

(Amounts in thousands, except per share data)

Note 16 - Income Taxes (cont’d)

F.Deferred taxes (cont’d)

As of December 31, 2020, a foreign subsidiary has net operating loss carryforwards aggregating approximately $333. Included within the deferred tax expenses for the year ended December 31, 2020 is a benefit of $113 for the recognition of a deferred tax asset for operating loss carryforwards.

G.Accounting for uncertainty in income taxes

For the years ended December 31, 2020, 2019 and 2018, the Company did not have any significant unrecognized tax benefits. In addition, the Company does not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.

The Company accounts for interest and penalties related to an underpayment of income taxes as a component of income tax expense. For the years ended December 31, 2020, 2019 and 2018, no interest and penalties related to income taxes have been accrued.

H.Tax assessments

The Company in Israel files its income tax returns in Israel while its principle foreign subsidiaries file their income tax returns in Belgium, Germany, Hong Kong, and United States of America. The Israeli tax returns of Camtek are open to examination by the Israeli Tax Authorities for the tax years beginning 2017, while the tax returns of its principal foreign subsidiaries remain subject to examination for the tax years beginning 1999 in Belgium, 2016 in Germany, 2013 in Hong Kong and 2017 in the United States of America.