{"id":3792,"date":"2025-01-10T15:14:03","date_gmt":"2025-01-10T15:14:03","guid":{"rendered":"https:\/\/swslaw.co.il\/?p=3792"},"modified":"2026-08-20T15:06:49","modified_gmt":"2026-08-20T15:06:49","slug":"%d7%a2%d7%93%d7%9b%d7%95%d7%9f-%d7%9c%d7%94%d7%a0%d7%97%d7%99%d7%95%d7%aa-%d7%a8%d7%a9%d7%95%d7%aa-%d7%94%d7%9e%d7%99%d7%a1%d7%99%d7%9d-%d7%9c%d7%aa%d7%a0%d7%90%d7%99%d7%9d-%d7%a9%d7%91%d7%94%d7%9d","status":"publish","type":"post","link":"https:\/\/swslaw.co.il\/en\/%d7%a2%d7%93%d7%9b%d7%95%d7%9f-%d7%9c%d7%94%d7%a0%d7%97%d7%99%d7%95%d7%aa-%d7%a8%d7%a9%d7%95%d7%aa-%d7%94%d7%9e%d7%99%d7%a1%d7%99%d7%9d-%d7%9c%d7%aa%d7%a0%d7%90%d7%99%d7%9d-%d7%a9%d7%91%d7%94%d7%9d\/","title":{"rendered":"The Tax Authority has updated its directive on the Tax Consequences of SAFE Invesments"},"content":{"rendered":"
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In January 2025, the Tax Authority published new directives (the \u201cNew Directives\u201d), which update and replace the directives it had published in March 2023 (the \u201cPrevious Directives\u201d), concerning the tax consequences of an investment in a company by way of an investment vehicle known as SAFE (\u201cSimple Agreement for Future Equity\u201d).<\/p>\n\n

The purpose of the new guidelines is to provide certainty to the public regarding the position of the Tax Authority on the taxation of a SAFE transaction, which is a transaction for the purchase of shares by an investor under an agreement that involves a financial investment at a specific time in exchange for the allocation of shares at a later date, where the value of the shares to be received upon allocation will be higher than the investor's financial investment.<\/p>\n\n

Transactions of this type are considered an efficient means of raising capital quickly for companies that lack an agreed-upon valuation, a situation that is characteristic mainly of early-stage technology companies.\u00a0<\/p>\n\n

Since the difference between the number of shares actually received by an investor in a SAFE transaction and the number of shares that could be purchased at the market value results from a change in the company\u2019s market value between the time of the investment and the time of share allocation, the question arises whether this difference constitutes interest income, which may be taxable under various alternatives, or whether the transaction, from start to finish, constitutes an investment in the company\u2019s shares subject to capital gains tax.<\/p>\n\n

For the purpose of providing certainty regarding the classification of the income as mentioned, the guidelines set out the conditions under which the allocation of shares pursuant to a SAFE transaction will be considered an investment in the company\u2019s shares, without including an interest payment component, despite the existence of a \"discount\" element.<\/p>\n\n

The New Directives contain updates and clarifications to the Previous Directives were made to provide added certainty on the qualification of the SAFE as a \u2018capital\u2019 rather than a contractual vehicle, which does not generate a taxable event at the time the shares are issued.<\/p>\n\n

Here are the main updates:<\/h2>\n\n