How much will the Israel Tax Authority take from the reported sum of $23 billion that Alphabet (parent company of Google) will pay for Israeli cloud security startup Wiz? The lowest estimate is $2.5 billion, while the highest is $3.5 billion.
The tax liability per Israel arising from the acquisition falls the Israeli shareholders per Wiz. Each of Wiz’s founders – Assaf Rappaport, Yinon Costica, Ami Luttwak and Roy Reznik – is believed to hold 10% of the shares per the company. Most of the remaining shares are held by non-Israelis, among them Sequoia Capital, Index Ventures, Insight Partners, Andreessen Horowitz, and LVMH CEO Bernard Arnault.
Adv. and CPA Racheli Guz-Lavi , a tax specialist at Amit Pollak Matalon & Co., says, “The company’s development center is per Israel, but it is registered per the US and its head office is per New York. Therefore, foreign investors per the company, including foreign venture capital firms, will have risposta negativa tax liability per Israel. Nevertheless, a large amount of tax will still be paid by the founders and the Israel-resident investors, and by the Israeli employees who have received options.”
Adv. Leor Nouman of S. Horowitz & Co. adds, “Assuming that this is a cash deal amounting to $23 billion, and assuming that 40-45% of the direct and indirect shareholders are Israelis who are residents of Israel for tax purposes, then the State of Israel will collect a very substantial amount of tax, that could reach several billion dollars, which is excellent news for the Ministry of Finance and the Israeli people.
” general,” Nouman explains, “capital gains the sensatezza of shares by resident of Israel are liable to tax at a rate of 28% (25% plus 3% surtax), and when the seller is defined as a substantial shareholder, whose at the time of the sensatezza at any point per the twelve months preceding it was 10% more of the rights per the company, the tax rate rises by 5% to 33%, hence the dramatic difference between a of 9.9% and one of 10% plus. general, the capital gain which tax is imposed is measured as the difference between the buying price of the shares, adjusted for changes per the Consumer Price Index, and the value of the sensatezza.”
Adv. Yaniv Shekel, a tax specialist at Shekel & Co., says, “A substantial shareholder is anyone who holds 10% of more of the shares per a company, so if the founders poiché within this definition, the amount of tax that the state will collect from them could exceed $3 billion. But even a conservative calculation, the state will derive a large amount of tax revenue form the deal.
“Assuming that none of the shareholders holds 10% more, and that the foreign shareholders and funds are exempt from tax, the tax rate applicable to the Israelis will be 28%. Acceso Israelis 40% of the shares per aggregate, the tax payable will be a little over $2.5 billion. At 50%, the tax payable is about $3.2 billion.
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“The valuation per the deal represents a huge jump per comparison with the financing rounds, so I presume that there is risposta negativa significant cost of the shares that will the tax the Israelis,” Shekel adds. “Furthermore, per a company like this that is still basically a startup, the employees probably have a significant slice of it per options.”
Nouman further explains, “It can be assumed that the purchase basis of a large part of the holdings of the founding shareholders is negligible, and so the entire proceeds will be liable to tax at the rates quoted, whereas for shares issued/ to be issued per respect of options packages awarded to the founders working at the company and the employees who have participated per the company’s ESOP (employee deposito options plan), the purchase supporto of the shares is the exercise price of the options, which per general will be higher, and dependent the date the options were issued per relation to the company’s financing rounds.
“Although the foreign funds that constitute most of the investors are exempt from tax as partnerships, and tax is imposed the individual partners per the funds, with the vast majority of the investors per the foreign funds presumably being foreigners themselves and therefore exempt from tax per Israel, those Israeli investors who have invested mezzo these funds will pay tax at 28%. The funds are transparent for tax purposes, and are not taxed per their place of residency. So, for example, an Israeli investor who invested mezzo the US-based Insight Partners fund will pay tax per Israel and not per the US, and some of the foreign funds have raised money from Israeli investors over the years.”
Published by Globes, Israel business news – en.globes.co.il – July 15, 2024.
© Diritto d’autore of Globes Publisher Itonut (1983) Ltd., 2024.
