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Israel Considers Adopting US Tax Model to Retain Entrepreneurs
The Israeli Ministry of Finance is considering a major tax reform to grant high-tech entrepreneurs, investors, and employees a full capital gains tax exemption on startup shares. The initiative aims to combat a brain drain of tech talent and prevent Israeli companies from registering in the United States.
3 newsrooms · 2 languages · since
What happened
- 01The Ministry of Finance is exploring a full capital gains tax exemption for Israeli tech entrepreneurs to prevent emigration.
- 02The proposed tax reform would mirror the U.S. Qualified Small Business Stock program to retain local talent and companies.
- 03Entrepreneurs, investors, and employees holding startup shares for five years could receive tax exemptions capped at $15 million.
- 04The tax relief would apply to companies with assets under $75 million at the time of their initial public offering.
- 05The exemption would scale up, offering 50% relief after three years of ownership and 75% after four years.
- 06Currently, Israeli residents cannot access the U.S. tax benefit without completely severing their Israeli tax residency.
- 07The initiative comes amid discussions to increase taxes on employee stock options from 25% to 30% under Section 102.
- 08The ministry is prioritizing new incentives to support the high-tech sector against security instability and political uncertainty.
The proposed benefit would mirror the American Qualified Small Business Stock (QSBS) program. Under the plan, individuals holding startup shares for five years could receive a full capital gains tax exemption, capped at approximately $15 million (NIS 46 million) or ten times their investment. The exemption would apply to companies with assets under $75 million at the time of their initial public offering, with partial relief of 50% after three years and 75% after four years of ownership.
Currently, Israeli entrepreneurs must sever their tax residency to benefit from the U.S. program, as they remain liable for Israeli capital gains tax while living in Israel. The new initiative is being discussed alongside internal debates regarding employee stock options, where the Israel Tax Authority had suggested raising taxes from 25% to 30%, though the ministry now appears inclined to expand incentives to bolster the local tech sector amid security tensions and political uncertainty.
Summarized by baba from the reports of 3 newsrooms. Updated
Latest report: Cursorinfo. Read Cursorinfo’s originalThe coverage
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