We write to inform you about amendments to the “Angels Law” that were recently enacted with the aim of encouraging private investment in new start-ups in the seed stage (the “Amendment“).
The “Angels Law” refers to the provisions of section 20 of the 2011-2012 Economic Policy Law, which was passed as a temporary order and was in force during 2011-2015 (the “Law“).
The Law provided a number of incentives for investments in early-stage companies, including treating investments meeting certain criteria as a deductible expense for tax purposes, regardless of the source of the investor’s funds (e.g., salary, capital gains etc.). The amount of the deduction was up to NIS 5 million over a period of three tax years (the “Tax Benefit” and “Benefit Period,” respectively).
In practice, however, investors took advantage of the Law infrequently, in part, because of the uncertainty as to whether the investment would actually be entitled to the Tax Benefit (as this was in doubt until the end of the Benefit Period).
In light of this situation, the Amendment sets forth a series of conditions that, if satisfied, ensure the investor of his entitlement to the Tax Benefit at the time the investment is made. The Amendment will also extend the existing tax benefits track in the Law until the end of 2019.
The Amendment is a temporary order and will remain in force from January 1, 2016 until December 31, 2019.