Conversion of a SAFE is usually not a taxable event for the company or investor in most jurisdictions - however, it depends heavily on the tax domicile of the company and investor. Here is some info for most common jurisdictions:
- Investors:
- Cost basis in new shares = original SAFE amount (adjusted for cap/discount).
- Holding period for capital gains (and special rules like US QSBS) normally starts at conversion (pre-money SAFE) or sometimes earlier (perhaps a post-money SAFE treated as equity from day 1).
- No immediate tax in most cases; tax typically hits later on share sale.
- Company side:
- Almost always no tax upon conversion.
SAFE conversions rarely trigger immediate tax hits, but outcomes are highly jurisdiction-specific and fact-dependent. Always seek advice from qualified tax counsel in the relevant countries - this is not it!