Palo Alto Networks $25 billion acquisition of Israeli cybersecurity company CyberArk Software (Nasdaq: CYBR) could earn Israel’s state coffers $2 billion in taxes – about NIS 6.7 billion at today’s exchange rate. The precise amount will depend on the Israeli shareholders and their place of residence for tax purposes.
Isak Rofe CPA, an international taxation expert at Meir Mizrahi with A. Rafael & Co. law firm explains that the amount of revenue to the state depends on several factors. He says, “The founders of CyberArk are Israelis, but some of them officially left for the US. The final amount depends on how many Israeli shareholders the company has.” Rofe believes that based on the fact that the company has about 1,000 employees in Israel out of about 4,000 in total, as well as estimates regarding additional Israeli investors, then 25%-30% of the company is in Israeli hands.
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“Taxation in Israel is considered relatively high”
The tax calculation is complex and depends on the type of shareholder. Anyone who holds less than 10% of the shares will pay 25% capital gains tax, and if their total income exceeds NIS 720,000 shekels, an additional 5% surtax will be added, in accordance with the new law that came into effect at the beginning of 2025. Substantial shareholders, those who hold more than 10% will pay 30% capital gains tax plus 5% surtax, assuming they are Israeli residents.
A special situation applies to founders who have left Israel over the years. “Anyone who leaves Israel pays an exit tax, which is determined by the number of days spent in Israel compared with the number of days spent abroad during the holding period,” explains Rofe. For example, if the company was founded in 1999 and the founder left for this purpose in 2012, he was only in Israel for half of the period, and therefore will pay half the tax in Israel that Israeli residents pay – 15% instead of 30%.
In the US, the federal capital gains tax rate is only 20%, plus state taxes that range from 0% to 11%. “This is not a zero-sum game for shareholders,” Rofe notes. “Taxation in Israel is considered relatively high, so the more you leave Israel for a state in the US with low taxation, the tax rate will decrease following the move.” However, former Israeli residents are supposed to receive a tax credit in the US for the tax they paid in Israel.
Published by Globes, Israel business news – en.globes.co.il – on July 30, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
