Insights

Israel Updates Tax Guidance on SAFEs

Editorial Team 21 Feb 2025

An overview by Herzog Fox & Neeman, Taxand Israel

The Israel Tax Authority (ITA) has recently issued an updated version of its 2023 guidance on the tax treatment of Simple Agreements for Future Equity (SAFEs), clarifying key aspects and addressing ambiguities. The new guidelines apply to SAFEs signed between 1 January 2025 and 31 December 2026, expanding their applicability while maintaining the capital instrument classification criteria.

Key revisions include:

• Increased investment cap: Raised from NIS 40 million to USD 20 million per investor.
• Expanded conversion options: SAFEs can now convert into shares on a predetermined date, not just upon a triggering event.
• Flexible discount rates: A bracketed discount mechanism is now permitted.
• To qualify under the ITA’s green route (ensuring SAFEs are treated as equity, not debt), specific conditions must be met. These include: the company’s high-tech focus, no prior funding round at a known valuation, transfer restrictions, subordination to other liabilities, and a minimum holding period post-conversion.

Tax experts from our Israeli member firm Herzog Fox & Neeman have published a more detailed overview on this guidance and its implications for businesses. They urge companies using SAFEs or similar convertible instruments to assess compliance with the updated guidelines to avoid unexpected tax liabilities.

You can read the full article in more detail here.

Article tags

Corporation Tax | Israel | Tax | Tax Law