Israel Tax Authority Offers Relief on IP Carve-Outs in Startup Acquisitions
Summarized from The Jerusalem Post by baba
The Israel Tax Authority has introduced new guidance to prevent "triple taxation" on intellectual property (IP) carve-outs during the acquisition of Israeli startups by foreign buyers. This guidance offers three potential solutions: establishing R&D centers, using joint ventures with cost-sharing, or developing new IP. These measures aim to reduce the tax burden, which can otherwise exceed 80% when IP is moved abroad after a share deal. The new rules are designed to encourage foreign investment while retaining R&D employment in Israel.
The story in 6 lines · by baba
- Israel Tax Authority guidance aims to prevent over 80% tax on IP carve-outs during startup acquisitions.
- Three solutions are offered: R&D centers, joint ventures with cost-sharing, or new IP development.
- One option allows a 6% capital gains tax on IP carve-outs for special technological enterprises.
- Joint ventures using cost-sharing agreements can avoid taxable carve-out events.
- New R&D for foreign acquirers may be compensated at cost plus 13% or 14%.
- Acquiring groups must meet revenue thresholds and have tax treaties with Israel.
The Jerusalem Post publishes in English. The key points are summarized above. Read The Jerusalem Post’s full report from the link at the top of the page.