You recently were offered options at your workplace, which may with a little luck increase the capital available to you. Options raise many questions, including what is the amount of tax paid on them, which is completely natural. Most of the things you should know – you will find in the article
What Is the different employee equity taxation route?
Israel tax reform, on the 1st of January 2003, created a new regulatory provision.
The options allocation options and shares for employees in section 102 are:
- Allocation route for employees through a trustee:
- Capital route
- Fruity route
- Allocation route for non-trustee
What Is The Taxation Employee Equity Compensation Rate In Israel?
- If a trustee under capital route manages your options, you will look at a tax rate of 25%. As a result realization of the options and the sale of the shares.
- If your options are managed by a trustee under the fruity route, it is classified as employment income. For that reason, it is classified as a marginal tax rate. As a result, the insurance premiums National and health tax reach up to 60%. The following benefits the company and allows it to benefit from the expenditure sold for tax purposes at the level of the profit accrued to the employee.
- If your options allocation is under a non-trustee, the options are classified employment income. It is taxed at a marginal tax rate, national insurance and health tax up to 60%. The following allows the company to benefit from tax relief.
The vast majority of the companies we encounter choose the capital route (with a trustee) for the benefit of their employees. Equally important, this route is less attractive to the company. Since it is not allowed to deduct as an expense the amount generated by the employee exercising the option. Produced by the employee from the exercise of the option
The following tax guidelines only applied for granting of options for employees, service providers and shareholders(holding below 10%).