Teva Pharmaceutical Industries (NYSE:TEVA) is making nice with the government of its native Israel. The company announced this week that it has reached agreement with the nation's tax authority to pay roughly 2 billion shekels ($565 million) to release so-called "trapped" profits that have accumulated since 2005.
"Trapped" profits are undistributed gains that certain Israeli companies have amassed in recent years. A provision of the country's encouragement-of-capital-investments law allowed tax exemptions for companies with local operations, as long as they did not distribute their profits in the form of dividends. In an attempt at capturing some of that take as tax revenue, the Israeli parliament last year approved a reduction in the taxation rate on such profits.
In addition to the trapped profits payout, Teva will dispense about 840 million shekels ($237 million) to the tax authority to settle tax assessments for the years 2005 to 2011.
The company, which is Israel's largest publicly traded entity, said it expects to book a charge of $235 million in its non-generally accepted accounting principles fourth-quarter 2013 results.
Teva, the world's largest generic drug maker, has long been a source of pride in Israel. But the company's image has been tarnished by plans for mass layoffs, including hundreds of jobs in Israel. The layoff plans caused uproar in Israel, where the company has enjoyed years of tax breaks and other incentives, and forced Teva's chief executive to step down last month.
-- Material from The Associated Press was used in this report.