How much will Israel collect from the Wiz-Google mega-deal?
Tax expert projects roughly NIS 13 billion, with payments expected as early as April.
Google’s planned $32 billion purchase of Wiz could generate roughly NIS 13 billion in tax revenue for Israel, according to tax experts, with founders expected to shoulder the lion’s share of the bill.
Attorney (CPA) Racheli Guz-Lavi, Managing Partner and Head of the Tax Department at the Amit, Pollak, Matalon Law Firm, how much tax revenue is the Wiz-Google deal expected to generate for the state coffers?
"The assumption is that it will generate between 10 and 15 billion shekels. I tend to think it is closer to 13 billion. I have seen many estimates, and it is impossible to know exactly."
Who among all the players in the Wiz-Google deal will owe income tax to the Tax Authority?
"First and foremost, the founders, that’s where most of the money will come from. Estimates suggest they together account for more than 30% of the proceeds, over $10 billion. Therefore, the tax on their share alone is expected to exceed 10 billion shekels, once multiplied by the tax rate and converted into shekels.
"Most Israeli investors, employees and limited partners in funds will owe capital gains tax of 25%-30%, while general partners in funds are expected to pay a higher rate, depending on the proportion of foreign investors."
Are there any players exempt from tax?
"Foreign investors are generally exempt, whether they invested through foreign or Israeli funds."
When is the money expected to reach Israel?
"In principle, on the closing date. Capital gains tax payments are usually made within 30 days. If the closing takes place in mid-to-late March, as reported, then most of the taxes will likely be paid between mid-to-late April. That would mark the beginning of advance payments to the Tax Authority.
"There are exceptions. For example, some employees who have not yet completed the required two-year holding period for their stock options will receive their funds within two years of allocation. But that represents only part of the total proceeds."
Is there a possibility that the Tax Authority will receive part of the tax payment in dollars?
"There used to be such a possibility. Today, I am not aware of such an option. It is possible that, given this is a ‘mega-deal,’ a specific arrangement could be reached. However, in the transactions I have handled, everything was paid in shekels, since the Israeli Tax Authority collects taxes in shekels."
Is there room for negotiation with the Tax Authority over how much tax will be paid?
"It is possible that taxation questions will arise regarding certain employees with options, but negotiations are not expected regarding the founders. They will have to pay capital gains tax and the full additional surtax.
"There could theoretically be an exceptional case if one of the founders held less than 10% at the time of the sale but more than 10% in the preceding year. However, I assume that is not the situation here."
Will they pay additional taxes?
"One of the founders already owes purchase tax because he bought a plot of land in Rishpon for 40 million shekels. In such cases, tax payments are effectively ‘rolling.’ The 40 million shekels in the Rishpon deal is just the first sign of what’s to come.
"Beyond the direct tax collection, there will also be indirect tax effects. This was one of the main reasons the Tax Authority sought voluntary disclosure measures in recent years. This money will act as a locomotive, driving many follow-on transactions, including real estate deals, but also other investments. Employees who receive substantial sums will buy, consume and spend in Israel. There is no doubt that such a deal provides a significant boost to the economy."
Will it strengthen the shekel?
"I believe so. Some of the sellers may diversify into foreign currency assets, since large sums are typically spread across markets. But clearly, some of the proceeds will remain in Israel and be converted into shekels. These individuals live and work here."
