Fractional CFO services in Israel

Israel Innovation Authority grants

The Israel Innovation Authority (formerly the OCS) is the central government body funding R&D in Israel. The flagship R&D Fund refunds 20-50% of qualifying R&D expenditure as a conditional grant - repayable as royalties on future revenue from the funded technology, with restrictions on IP transfer outside Israel.

Tnufa and early-stage IIA programmes

Tnufa provides up to ~85% of pre-seed R&D and proof-of-concept costs (capped per project) for very early-stage founders. The IIA also runs incubator programmes (Technology Incubators), bilateral cooperation funds and dedicated tracks for deeptech, climate and biotech.

Angel investor tax credit

Israeli individual investors can credit qualifying angel investments in early-stage R&D companies against future capital gains on the same shares - effectively a tax-deferred shelter mechanism. The scheme has changed materially over the years; check the current Innovation Authority and ITA guidance for thresholds in effect at the time of investment.

Preferred Technological Enterprise regime

A reduced corporate income tax regime (7.5-12% depending on location and size) for Israeli companies meeting an R&D-intensity test. The single biggest reason later-stage Israeli tech companies keep IP and operations in Israel rather than relocate after Series B.

Israeli VC and US-Israel dual structures

Major Israeli VCs (TLV Partners, Aleph, Pitango, Vintage and others) typically invest alongside US funds. Many Israeli startups operate a dual-company structure (US Delaware parent with Israeli R&D subsidiary) to facilitate US fundraising and exits, with the IIA grant rules and ITA pre-rulings governing the structure.

Venture debt and growth lending

Less developed than the US but functional. Bank Leumi-Tech, Bank Hapoalim Hi-Tech, Kreos Capital and Viola Credit are the most active providers. Typically deployed post-Series B against ARR or contracted revenue, often in the context of a dual US-Israel corporate structure.

Section 102 (capital gains track)

The flagship Israeli employee option scheme. Options or shares granted via a trustee, held for at least 24 months from grant. On sale, gains taxed at the 25% capital gains rate rather than as employment income (with limited exceptions for the strike-discount portion). Restricted to W-2 employees and certain officers.

Section 102 (ordinary income track)

The alternative 102 track, used where the company prefers a corporate tax deduction on the grant value. Gains on sale taxed as ordinary employment income for the employee. Less common than the capital gains track but useful in specific structuring scenarios.

Section 3(i) options

For non-employees who cannot sit inside Section 102 - service providers, consultants, board members, non-Israeli residents in some cases. No tax-advantaged treatment; gains taxed as ordinary income at exercise on the spread.

Trustee arrangements

Section 102 grants must be held by a qualifying trustee (typically an Israeli law firm, IBI Trust Services, ESOP Excellence or similar) for the duration of the holding period. The trustee handles tax withholdings on exercise and sale, plus reporting to the ITA. Standard part of an Israeli ESOP setup.

Valuation expectations

Israeli companies typically set option strike values based on the most recent priced round, with an independent valuation refreshed before major equity events. Companies with a US Delaware parent additionally need a 409A valuation for grants to US-resident employees.

ITA pre-rulings and reporting

The Israel Tax Authority issues pre-rulings on the tax treatment of equity plans and corporate reorganisations. Most material ESOP changes (cross-border transfers, corporate inversions, change of trustee) are filed for pre-ruling. Annual reporting on option exercises and dispositions is required.

Accounting

• •NetSuite - common at later stage and for dual US-Israel structures.
• •Priority - Israeli enterprise platform with deep local tax integration.
• •QuickBooks Online - for early-stage companies, especially with US parent.

Payroll

• •Hilan or Michpal - Israeli payroll standards for Bituach Leumi and Mas Hachnasa filings.
• •Gusto or Rippling - for the US side of dual-entity startups.
• •Deel or Remote - for hiring contractors outside Israel.

Business banking

• •Bank Leumi-Tech or Bank Hapoalim Hi-Tech - for Israeli operations.
• •Mercury or Brex - for the US-parent side of dual structures.
• •First Citizens (ex-SVB) - for venture debt and larger balances on the US side.

Cap table & equity admin

• •Carta - dominant for Israeli companies with US parents.
• •Pulley - strong alternative, including 409A coverage for US-Israel structures.
• •IBI Trust Services - common Section 102 trustee, often paired with a cap-table tool.

Expenses & corporate cards

• •Brex and Ramp - for the US side of dual entities.
• •Pleo - alternative with European coverage.
• •Local Israeli credit lines via Leumi or Hapoalim - for shekel-denominated spend.