On December 5, 2018, the Israeli Tax Authority (the
"ITA" ) published the Income Tax
Circular number: 18/2018, on the topic of "Performance
Equity-Based Awards" (the
"Circular").
The Circular discusses conditions according to which allocation
of equity-based awards ("Awards") to
employees whose vesting is dependent on certain mile-stones, will
be considered in compliance with the provisions of Section 102 of
the Israeli Tax Ordinance [New Version], 1961
("Section 102" and the
"ITO", respectively).
Background
Companies often chose to grant their employees with Awards (i.e.
options, restricted stock units, restricted stock etc.), in order
to motivate them to continue their employment for the long run.
According to the provisions of Section 102, when an employee
exercises1 his options, he/she will be able to enjoy a
reduced capital gains tax rate of 25%, where the grant was
classified as a "Capital Gains Tax Track with a
Trusteeˮ.
