What are the tax implications for shareholders and the company under Israeli law for the buyback?

Tax‑impact under Israeli law

In Israel a share‑repurchase is generally treated as a taxable distribution (i.e., a dividend) for the portion that exceeds the shareholder’s cost basis, unless the buy‑back qualifies as a “non‑taxable repurchase” under the 2022‑2023 “tax‑free buy‑back” regime. Because Wix’s buyback is being carried out in the open market and is not a “tax‑free” repurchase (the program does not meet the strict “no‑cash‑flow‑to‑shareholders” test), the Israel Tax Authority treats the cash paid to shareholders as a dividend for Israeli‑resident shareholders. The standard 25 % withholding tax (plus the 2 % surcharge for residents who hold shares for less than 12 months) is therefore withheld at source. The rate can be reduced under an applicable tax treaty (e.g., 15 % for U.S. residents under the Israel‑U.S. treaty). Israeli‑resident individuals then pay the regular 25 % capital‑gain tax on any gain above cost, but because the amount is classified as a dividend the capital‑gain tax does not apply – the withholding tax is the final tax charge. For foreign shareholders listed on the NASDAQ, the dividend‑type portion of the buy‑back is subject to the same 25 % withholding (subject to treaty relief), while capital‑gain tax is normally exempt on foreign‑exchange‑listed shares.

For the company, the buy‑back itself does not generate a deductible expense; it simply reduces equity and the number of shares outstanding. The only tax cost for Wix is the withholding‑tax obligation it must remit on each payment (the 25 % rate, potentially reduced by a treaty). The company will need to file the appropriate Israeli tax forms (e.g., Form 105‑2) and may receive a credit for any foreign‑tax credits it can claim under double‑tax‑treaty provisions. No corporate income‑tax is triggered on the repurchase.

Trading implications

The tax structure reduces the net cash return for Israeli shareholders (≈ 25 % tax), which may temper demand from domestic investors compared with foreign investors who face only the withholding‑tax portion and no capital‑gain tax. The announced $200 million extension, after already buying $300 million of stock, signals strong balance‑sheet flexibility and suggests a price‑support bias—especially if the stock is trading near its 200‑day moving average or recent support zones. Traders could look for a short‑term rally as the market prices the $500 million buy‑back (the “buy‑back premium”), but keep an eye on the post‑buy‑back price reaction once the tax‑adjusted cash return for Israeli investors is factored in. A practical tactic is to go long on the breakout above the recent resistance (≈ $XX) with a stop‑loss just below the 200‑day MA, while monitoring the release of the actual buy‑back schedule; a tight stop helps mitigate any pull‑back if the tax‑related dividend‑treatment dampens buying pressure from local investors.