Entity information:
NOTE 18:-     INCOME TAXES

a.
Tax rates in U.S:

The Company is subject to U.S. federal tax at the rate of 34%.
 
On December 22, 2017, the TCJA was signed into law making significant changes to U.S. income tax law. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has calculated its best estimate of the impact of the TCJA in its year end income tax provision in accordance with its understanding of the TCJA and guidance available as of the date of this filing and as a result has recorded $19.2 million as an additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted.
 
The provisional amount related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was $0.5 million. Additional work is necessary to reflect the actual rate at which those deferred tax assets and liabilities expected to reverse.
 
The provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was $18.7 million based on cumulative foreign earnings of $145 million. Additional work is necessary to do a more detailed analysis of historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.
 
Additionally, the Tax Act requires certain Global Intangible Low Taxed Income (“GILTI”) earned by controlled foreign corporations (“CFCs”) to be included in the gross income of the CFCs’ U.S. shareholder.  GAAP allows the Company to either: (i) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”); or (ii) factor such amounts into its measurement of deferred taxes (the “deferred method”).  The GILTI tax rules will become effective for the 2018 tax year and therefore the Company has not made any adjustments related to the potential GILTI tax in its financial statements for the year ended December 31, 2017.  The Company continues to evaluate the impact of the new GILTI tax rules and the application of ASC 740 on its financial statements.
 
b.
The Company’s German subsidiary is subject to German tax at the rate of 33%.

c.
Corporate tax in Israel:

Taxable income of Israeli companies is subject to corporate tax at the rate of 26.5% in the years ended June 30, 2014 and 2015, and 25% in the year ended June 30, 2016 onwards.
 
The Israeli subsidiary is also eligible for tax benefits as further described in note 18k.
 
In December 2016, the Israeli Parliament approved the Economic Efficiency Law 2016 (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 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.
 
d.
Carryforward tax losses:

As of December 31, 2017, the Company has no federal or state carryforward tax losses.

As of December 31, 2017, the Israeli and German subsidiaries have no net carryforward tax losses.

e.
Deferred income taxes:

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The Company’s Israeli subsidiary’s tax-exempt profit from Benefited Enterprises is permanently reinvested, as the Company’s management and the Board of Directors has determined that the Company does not currently intend to distribute dividends. Therefore, deferred taxes have not been provided for such tax-exempt income. The Company intends to continue to reinvest these profits and does not currently foresee a need to distribute dividends out of such tax-exempt income.
Significant components of the Company’s deferred tax liabilities and assets are as follows:

   
December 31,
    
June 30,
  
   
2017
    
2016
    
2016
  
                   
Assets in respect of:
                  
                   
Carryforward tax losses
  
$
-
    
$
-
    
$
     4,186
  
Research and Development carryforward expenses- temporary differences
    
5,380
      
908
      
743
  
Stock based compensation
    
1,622
      
1,039
      
562
  
Other reserves
    
1,338
      
868
      
805
  
                         
Deferred tax assets, net
  
$
8,340
    
$
2,815
    
$
6,296
  

The Company remeasured these non-current assets and liabilities at the applicable tax rate of 21% in accordance with the TCJA. The remeasurement resulted in a total decrease in these assets of $0.5 million.

f.
Uncertain tax positions:

As of December 31, 2017 and 2016, the Company’s Israeli subsidiary recognized a total liability for uncertain tax positions in the amount of $0.6 and $0.3 million, respectively.
 
 g.
Income before taxes is comprised as follows:

   
Year Ended
December 31, 2017
    
Six months
ended
December 31, 2016
    
Year ended June 30,
  
           
2016
    
2015
  
                         
Domestic
  
$
7,461
    
$
3,165
    
$
3,758
    
$
2,830
  
Foreign
    
92,783
      
27,433
      
68,472
      
20,246
  
                                 
   
$
100,244
    
$
30,598
    
$
72,230
    
$
23,076
  

h.
Taxes on income (tax benefit) are comprised as follows:

   
Year ended December 31, 2017
    
Six months ended December 31, 2016
    
Year ended June 30,
  
           
2016
    
2015
  
Domestic taxes:
                        
Current
    
19,889
      
1,047
      
1,737
      
1,655
  
Deferred
    
(42
)
    
507
      
(1,380
)
    
-
  
Foreign taxes:
                                
Current
    
1,639
      
518
      
263
      
300
  
Deferred
    
(5,414
)
    
3,145
      
(4,999
)
    
-
  
                                 
   
$
16,072
    
$
5,217
    
$
(4,379
)
  
$
1,955
  

i.
Reconciliation of theoretical tax expense to actual tax expense:

The differences between the statutory tax rate of the Company and the effective tax rate are primarily accounted for by the non-recognition of tax benefits from accumulated net carryforward tax losses among the Company and various subsidiaries due to uncertainty of the realization of such tax benefits.
 
A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company, and the actual tax expense (benefit) as reported in the consolidated statements of operations is as follows:

   
Year ended
December 31,
    
Six months
ended
December 31,
    
Year ended June 30,
  
   
2017
    
2016
    
2016
    
2015
  
                         
Income before taxes, as reported in the consolidated statements of operations
  
$
100,244
    
$
30,598
    
$
72,230
    
$
23,076
  
                                 
Statutory tax rate
    
34
%
    
34
%
    
34
%
    
35
%
Theoretical tax benefits on the above amount at the US statutory tax rate
    
34,083
      
10,403
      
24,558
      
8,077
  
Income tax at rate other than the U.S. statutory tax rate
    
(34,734
)
    
(5,396
)
    
(30,229
)
    
(9,305
)
Tax Cuts and Jobs Act of 2017
    
18,735
      
-
      
-
      
-
  
Non-deductible expenses
    
(1,545
)
    
164
      
1,514
      
3,003
  
Other individually immaterial income tax items
    
(467
)
    
46
      
(222
)
    
180
  
                                 
Actual tax expense (tax benefit)
  
$
16,072
    
$
5,217
    
$
(4,379
)
  
$
1,955
  

j.
Tax assessments:

As of December 31, 2017, the Company and certain of its subsidiaries filed U.S. federal and various state and foreign income tax returns. The statute of limitations relating to the consolidated U.S. federal income tax return is closed for all tax years up to and including 2014.

The statute of limitations related to tax returns of the Company’s Israeli subsidiary is closed for all tax years up to and including 2012.

The statute of limitations related to tax returns of the Company’s German subsidiary is closed for all tax years up to and including 2014.

With respect to the Company’s Chinese, Australian, Canadian, Dutch, Japanese, UK, French, Italian, Bulgarian, Turkish, Belgian, Indian, Swedish, and Romanian subsidiaries, the statute of limitations related to its tax returns is open for all tax years since incorporation.

The Company believes that it has adequately provided for reasonably foreseeable outcomes related to tax audits and settlements. The final tax outcome of any Company tax audits could be different from that which is reflected in the Company’s income tax provisions and accruals. Such differences could have a material effect on the Company’s income tax provision and net income (loss) in the period in which such determination is made.
 

k.
Tax benefits for Israeli companies under the Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”):

The Israeli subsidiary elected tax year 2012 as a "Year of Election" for “Beneficiary Enterprise” status under the Investment Law. According to the Investment Law, the Israeli subsidiary elected to participate in the alternative benefits program which provides certain benefits, including tax exemptions and reduced tax rates. Income not eligible for Beneficiary Enterprise benefits is taxed at a regular corporate tax rate (which depend on, inter alia, the geographic location in Israel). Upon meeting the requirements under the Investment Law, undistributed income derived from Beneficiary Enterprise from productive activity will be exempt from tax for two years from the year in which the Israeli subsidiary first has taxable income, provided that 12 years have not passed from the beginning of the year of election. In the six months ended December 31, 2016, the Israeli subsidiary utilized all of its operating loss carryforwards in Israel and became profitable for tax purposes. As of December 31, 2017, the Israeli subsidiary is entitled to benefit from a two year tax exemption as part of the Beneficiary Enterprise regime.
 
If dividends are distributed out of tax-exempt profits, the Israeli subsidiary will then become liable for tax, with respect of the gross amount of the dividend at the rate applicable to its profits from the Beneficiary Enterprise in the year in which the income was earned, as if it had not chosen the alternative track of benefits.

The dividend recipient is subject to withholding tax at the rate of 15% applicable to dividends from Beneficiary enterprises, or such lower rate as may be provided in an applicable tax treaty.  If the dividend is distributed during the tax benefits period or within twelve years thereafter. This limitation does not apply to a foreign investors' company. The Israeli subsidiary currently has no plans to distribute dividends and intends to retain future earnings to finance the development of its business.

Through December 31, 2017, the Israeli subsidiary had generated income under the provision of the Investment Law.
 
As of December 31, 2017, approximately $151 million was derived from tax exempt profits earned by the Israeli subsidiary “Beneficiary Enterprises.” The Company has determined that such tax-exempt income will not be distributed as dividends and intends to reinvest the amount of its tax exempt income earned by the Israeli subsidiary. Accordingly, no provision for deferred income taxes has been provided on income attributable to the Israeli subsidiary “Beneficiary Enterprises” as such income is essentially permanently reinvested.

If the Israeli subsidiary retained tax-exempt income is distributed, the income would be taxed at the applicable corporate tax rate which depend on the foreign ownership in each tax year, the tax rate can range between 10% (when foreign ownership exceeds 90%) to 25% (when foreign ownership exceeds 49%).
 
Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 71):
 
On August 5, 2013, the Israeli Parliament issued the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for 2013 and 2014), 2013 which consists of Amendment 71 to the Law for the Encouragement of Capital Investments ("the Amendment"). According to the Amendment, the tax rate on preferred income from a preferred enterprise in 2014 and thereafter will be 16% (in development area A (as defined therein and which details specific areas in development in Israel) will be 9%).
 
The Amendment also prescribes that any dividends distributed to individuals or foreign residents from the preferred enterprise's earnings as above will be subject to tax at a rate of 20%.
 
Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 73):

In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes Amendment 73 to the Law for the Encouragement of Capital Investments ("the  2017 Amendment") was published. According to the 2017 Amendment, a preferred enterprise located in development area A will be subject to a tax rate of 7.5% instead of 9% effective from January 1, 2017 and thereafter (the tax rate applicable to preferred enterprises located in other areas remains at 16%).

The 2017 Amendment also prescribes special tax tracks for technological enterprises, which are subject to rules that were issued by the Ministry of Finance.

The new tax tracks under the 2017 Amendment are as follows:

According to the 2017 Amendment, preferred technological enterprise is an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion. A technological preferred enterprise, as defined in the Investment Law, which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property (in development area A - a tax rate of 7.5%).

Special preferred technological enterprise is an enterprise for which total consolidated revenues of its parent company and all subsidiaries exceed NIS 10 billion. Such enterprise will be subject to tax at a rate of 6% on profits deriving from intellectual property, regardless of the enterprise's geographical location.

Any dividends distributed deriving from income from the preferred technological enterprises or special preferred technological enterprise will be subject to tax at a rate of 20%. The 2017 Amendment further provides that, in certain circumstances, a dividend distributed to a foreign corporate shareholder, would be subject to tax at a rate of 4% (if the amount of foreign investors exceeds 90%).

The Israeli subsidiary is entitle to the above mentioned preferred technological enterprise benefits and will be subject to tax at a rate of 12% on profits deriving from intellectual property or 7.5% in development area A, under the 2017 Amendment.
 
Tax Benefits for Research and Development:

Israeli tax law (section 20a to the Israeli Tax Ordinance) allows, under certain conditions, a tax deduction for research and development expenses, including capital expenses, for the year in which they are paid.  Such expenses must relate to scientific research in industry, agriculture, transportation, or energy, and must be approved by the relevant Israeli government ministry, determined by the field of research. Furthermore, the research and development must be for the promotion of the company’s business and carried out by or on behalf of the company seeking such tax deduction.  However, the amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. As for expenses incurred in scientific research that is not approved by the relevant Israeli government ministry, they will be deductible over a three-year period starting from the tax year in which they are paid.