Governmental subsidies are given to local Israeli film productions. According to the Cinema Regulations only an Israeli production can benefit from subsidies. "Israeli production" is defined as an Israeli resident for a physical person or that its main commercial activity is in Israel, it is controlled by Israelis, its manager and at least half its directors are Israelis for a legal person.
"Functions of the Council
3. (a) These are the functions of the Council: [...]
(2) Advise the Minister regarding the determination of tests for support of public institutions as stated in section 3A of the Budget Basics Law, in order to promote the objectives listed below, and taking into account, inter alia, the types of public institutions and trends and changes that occur from time to time in cinema:
(A) promoting and encouraging the creation, production and distribution of Israeli films, including full-length and short-length feature films and documentaries;
(B) encouraging international cooperation in the field of cinema;
(C) promoting the Israeli film;
(D) awarding prizes to films, professionals and young filmmakers;
(E) encouraging film festivals;
(F) Support for the preservation of the Israeli film.
[...]
Providing supports and a pool of vectors
12. (a) Grants from the cinema budget shall be made according to tests to support public institutions, as stated in section 3 (2), determined by the Minister after consultation with the Council, provided that at least 60% of the cinema budget will be directed to Israeli films. Israeli films in the international film market.
[...]
Conditions for recognition of an Israeli film
13. The   Minister, in consultation with the Council and with the approval of the Committee, shall determine in the rules conditions for the recognition of a film made by Israeli entities as an Israeli film for the purposes of this Law, including conditions for recognition of such film in joint production with non-Israeli entities.[...]" (Cinema Law (10.1.1999), last amended 10.1.2019, Sections 3, 12 and 13 [google translation])
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"Definitions
1 . (A) In these regulations - [...]
"Israeli resident" - an Israeli citizen and a resident who resides permanently or a permanent resident who resides there permanently.
[...]
Conditions for recognition of an Israeli film
2. (a) A film is an Israeli film for the purposes of the law if all of the following are met (hereinafter - the conditions for recognition of an Israeli film):
(1) the provisions of Regulation 3 are met in the body producing the film;
[...]
A body that produces an Israeli film
3. In order to meet the conditions for recognition of an Israeli film, the following conditions will be met by the body that produces the film:
(1) In a producer body that is not a corporation -
(A) If he is an individual - he is an Israeli resident;
(B) if he is a member of the people - more than half of them are Israeli residents;
(2) All of the following shall take place in the body of a producer which is a corporation:
(A) the center of his business in Israel;
(B) its general manager or a parallel position in the corporation is an Israeli resident;
(C) half or more of its directors or officers equivalent to directors are Israeli residents;
(D) control or more than 50% of a particular type of means of control in the producer's body is held by Israeli residents; If the control or more than 50% of a particular type of means of control in the body of the producer is held by one or more corporations, the control or holding of more than 50% of a certain type of means of control in such corporation or corporations, whether directly or indirectly, is held. In the hands of Israeli residents;
(E) The rate and attribution of the holdings shall be made as follows:
(1) To a controlling shareholder in a corporation - the holding of the means of control held by the corporation shall be attributed in full;
(2) A holder of a means of control who is not a controlling shareholder in a corporation - the holding of the means of control held by the corporation shall be attributed according to the rate of holdings of the right holder in the corporation;
(3) Notwithstanding the provisions of paragraph (2), if the corporation is a limited partnership, any general partner referred to in paragraph (1) shall exist, and if the general partner is a corporation, the provisions of paragraph (2) shall apply.
[...]
Assistance in producing an Israeli film
5 . An assisting public institution shall examine the existence of the conditions for recognition of an Israeli film before approving the body of an aid producer for the production of a film using support funds from the cinema budget earmarked for producing Israeli films, in accordance with section 12 of the Law. During all stages of its production, and in the basic copy.[...]" (Cinema Regulations (Recognition of the Film as an Israeli Film) (27.2.2005), Sections 1, 2, 3 and 5 [google translation])
Cinema Law (10.1.1999), last amended 10.1.2019, Sections 3, 12 and 13
Cinema Regulations (Recognition of the Film as an Israeli Film) (27.2.2005), Sections 1, 2, 3 and 5
[<a href="https://www.nevo.co.il/law_html/Law01/P202K2_001.htm">Law</a>],[<a href="https://www.nevo.co.il/law_html/Law01/999_401.htm">Reg</a>]