Israeli tax ruling - Investors

Last Revised: October 1st, 2021

Summary of Certain Israeli Tax Implications for Equitybee Investors Community

The below summary is based on a tax ruling issued by the Israel Tax Authority (“ITA”) to Equitybee (the “Tax Ruling”) and on the updated format of Equitybee’s Simple Option Funding Agreement (SOFA). 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 SOFA and of the official Tax Ruling are binding and will control, 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. Advancing the Funding Amount is not a “taxable event”.

According to the Tax Ruling, you will not be subject to Israeli tax on advancing the Funding Amount to the Option-holder via Equitybee’s platform.

2. No “Double Taxation” - Investor’s Upside is calculated based on the gross receivables amount.

Under the updated SOFA, the Investor’s Upside Amount is calculated with respect to the gross consideration paid to the Option-holder for the sale of the Target Shares, before deducting the Option-holder’s taxes. Meaning, there is no “double taxation” on the profit from the sale of the Target Shares.
In addition, dividends paid with respect to the Target Shares (net of withholding taxes), will first be used to repay the Funding Amount, all in accordance with the provisions of the SOFA.

3. Israeli Taxation.

Generally, amounts paid to you in excess of the Funding Amount and related costs (including commissions paid to Equitybee upon a sale) may be subject to Israeli tax (the “Israeli Taxable Income”), unless you are entitled to an exemption.

4. Payment of Israeli Taxable Income is generally subject to withholding tax.

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).

5. Notwithstanding, if you provide the Paying Agent with a certificate from the ITA that exempts or reduces the withholding amount, or if you are a non-Israeli resident and you provide the Paying Agent with the documents and information as defined by the ITA under the Tax Ruling, such withholding tax liability may be reduced or eliminated, as applicable.

6. Please note that tax withholding only constitutes an advance payment of Israeli tax liability and the ITA will be allowed to assess your taxable income regardless of any exemption from withholding.

7. 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.