Israeli tax ruling - Employees

Summary of Certain Israeli Tax Implications of Equitybee’s Tax Ruling - Option-holder

The below summary is based on a tax ruling issued by the Israel Tax Authority (“ITA”) to Equitybee (the “Tax Ruling”). An official summary of the Tax Ruling, as prepared by the ITA, will be provided to you in connection with signing the Simple Option Funding Agreement (SOFA) with Equitybee (the “Tax Ruling Notice”). The Tax Ruling will not derogate from any other tax ruling that you may have received or from the authority of the ITA to assess your taxable income, also in connection with the SOFA. The provisions of the official Tax Ruling are binding and will prevail, notwithstanding anything to the contrary in the summary below. This summary is prepared for convenience purposes only, should not be treated as an official document issued by the ITA and is not binding in any way. All defined terms in the summary below shall have the same meaning prescribed to them in the SOFA.

Note that the Tax Ruling applies to SOFAs signed (via Equitybee’s platform) as of October 1, 2021, that refer to the Tax Ruling.

  1. Receiving the Funding Amount is not a “taxable event”
  2. You will not be subject to tax upon the receipt of the Funding Amount for the purpose of exercising the Options.
  3. Under the Tax Ruling you will only pay tax for your part of the profit
  4. When you sell the Target shares or when the Target Shares will be registered on a stock exchange (if your company goes public), and you have a profit from the sale, you are required to pay tax for the profit. The payment of tax from your profit is done by the ESOP Trustee (usually at a rate of 25% of the profit 1).
    Under the Tax Ruling, the ESOP Trustee is allowed to take into account the fact that a part of your profit is actually being paid to the Investor and Equitybee under the terms of the SOFA, and to charge your tax only for your actual share of the profit. 2
  5. Note that the ESOP Trustee is not obligated to take into account your payments under the SOFA when calculating your tax.
  6. In this case, you are allowed to file an application for tax return in order to claim a refund of any overpayment of tax, based on the provisions of the Tax Ruling.
  7. Please review the Tax Ruling Notice that includes a more detailed explanation on how your taxes should be calculated.
  8. Under the Tax Ruling (and assuming that the Israeli Taxable Income is classified as capital gains) the Paying Agent will withhold taxes from your profit according to applicable tax regulations, currently at a rate of 25% for individuals or 23% for corporations or partnerships (such tax rates may change from time to time).
  9. As part of your obligations under the SOFA, you are required to declare that you will not act in any way that will be in conflict with the Tax Ruling. The main implication of this obligation is that you obligate not to ask the ITA for any other tax resolution or agreement with respect to the SOFA.
  10. This summary does not constitute tax advice with respect to the SOFA, the Tax Ruling or any other tax matter. Any tax advice should be provided to you by your own tax advisers; Equitybee will not and cannot provide you with any tax advice. You are obligated to follow the provisions of the Tax Ruling.
  1. THE TAX RATE MAY BE DIFFERENT IN CERTAIN CIRCUMSTANCES.
  2. Note that if prior to the sale of the Target Shares your company paid dividends for these shares, the ESOP Trustee will charge tax for the whole amount of the dividend. In this case, the amount of the dividend that is paid to the Investor will also be taken into account as payment you made under the SOFA in the final calculation of your profit from the sale.

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