This is general information, not tax, legal, or financial advice. Israeli and home-country tax interact in genuinely difficult ways here, and an equity award can be the largest single number in a household's finances. A qualified cross-border professional should read your actual grant documents before you act on any of it.
What is Section 102, and why does it land differently on you than on the Israeli sitting next to you?
Section 102 of the Income Tax Ordinance is the Israeli regime under which an employing company deposits share or option grants with an approved trustee, and the employee is taxed once, years later, at salary rates, at a 25% capital-gains rate, or at a split of the two, depending on which track the company elected before the grant was made and on whether the shares are listed 1 4. Your Israeli colleague can stop reading there. You cannot, because three things about the same piece of paper are different for a newcomer.
The first is that the aliyah benefit you were told about does not reach this income at all. The second is that a benefit built only for arrivals in one narrow window cuts straight through the middle of a Section 102 award. The third is that if you hold a US passport, the track that costs the least Israeli tax can cost you the most tax in total. Each of those gets its own labelled section below.
One piece of context explains why your Israeli employer's HR team may be less fluent in this than your last employer's was. In its circular of 9 December 2024 the Israel Tax Authority put the number of allocation plans filed for approval in Israel at roughly 700 a year, against roughly 7,000 equity plans filed with the IRS 3.
Who can be granted under Section 102: employees of the employing company, and officeholders, meaning a director, a CEO, or a manager reporting directly to the CEO. Controlling shareholders are excluded, as Section 102 defines them by reference to section 32(9) of the Ordinance, and grants to people outside the definition, consultants included, fall under section 3(i) instead 1 9.
The definition of "employing company" is the one that matters most if you joined the Israeli arm of a foreign group. It covers an Israeli-resident company, a foreign-resident company with a permanent establishment or a development centre in Israel that the Director of the ITA approved, and a parent, subsidiary or sister company of your employer 1. That is why a grant over your American or British parent's shares can still be a Section 102 grant. The plan filed with the ITA is usually the group's international plan with an Israeli Appendix attached, a document written specifically for Israeli law and Section 102, which must be filed alongside the plan 3.
Which track is your grant on, and what does each one cost?
Your company chose the track before you were offered anything, and the election belongs to the plan rather than to you. One track is elected per plan, notified to the assessing officer in an approval application filed at least 30 days before the grant date, and the plan and the trustee must be approved, with approval deemed given if the assessing officer does not answer within 90 days 1 3.
That lands harder on a newcomer than on the colleague who has been there since the seed round. The election binds every employee granted under that plan, save for employees of an employing company already bound by an earlier election, and it sticks: once a company has chosen, it has to keep to that choice for further trustee allocations until the end of the year after the allocation year, and can only move to the other track by applying in advance and getting approval 1. So the tax track attached to the equity line in your offer was fixed by a filing made before you had an Israeli tax file at all, it is not a term you can negotiate, and the first useful question at signing is not which track you want but which one the plan is already on.
| Track | Israeli classification | Headline rate | Minimum trustee hold | Employer deduction |
|---|---|---|---|---|
| Trustee, capital-gains track, sections 102(b)(2) to (b)(4) | Capital gain | 25% of the benefit value, as restated by the ITA on 19 March 2025 1 4 | The longer of the two trustee periods. See the section below on where the clock starts and why its end date has to be confirmed against your own plan 1 2 | None at all where the employee is taxed at 25% 1 |
| Trustee, ordinary track, section 102(b)(1) | Section 2(1) or 2(2) income | Marginal salary rates 1 | The shorter one. The ITA's 2003 circular put it at 12 months against the capital track's 24, both counted from the end of the tax year in which the shares were allocated and deposited 1 | Allowed to your direct employer, only in the year the tax was withheld and remitted 1 |
| Non-trustee, section 102(c) | Section 2(1) or 2(2) income | Marginal salary rates 1 | None | Allowed to your direct employer 1 |
That trade-off is the whole design. The capital-gains track buys you a 25% rate and costs the company its corporate deduction 1. A company may also run a non-trustee allocation alongside a trustee one 3.
One wrinkle sits inside the capital track. Where the company's shares are already listed on a stock exchange at the grant date, or become listed within 90 days of it, section 102(b)(3) splits the benefit in two: a slice computed from the average value of the shares over 30 trading days, less indexed acquisition costs, is ordinary income at regular rates, and only the excess above it is a 25% capital gain 1. On a grant made by an unlisted Israeli company, the whole benefit sits on the 25% side.
Two asymmetries are worth knowing before you plan around either track. Capital losses under section 92 can be offset against the capital component of a Section 102 award but not against any of the ordinary components, and the entitlement depends on filing section 131 returns for both the loss year and the claim year 4. And the real capital gain can be spread in equal annual parts over up to four tax years ending in the year of realization and no earlier than the grant date, which affects tax rates and credit points only, and never reduces the surtax, which the ITA requires to be paid in full in the realization year 9. Both are Israeli reliefs applied to the Israeli charge. Neither changes what a US or UK return computes, and neither moves the year in which the Israeli charge lands, which is the number every cross-border section below turns on.
What does the trustee actually do, and why is that arrangement your problem?
The trustee holds the shares and every right attached to them, and is jointly responsible with the company for withholding Israeli tax at source and for the online reports to the assessing officer 3. The ITA describes a trustee as a lawyer, an accountant or a trust company, and the company names its chosen trustee in the plan it files with the assessing officer 3. Under the ITA's filing circular of 9 December 2024 the employer and trustee file Form 146 quarterly for allocations made in the quarter and Form 156 annually for the balance of allocations as at 31 December, online, within 120 days of the end of the quarter or the year 3.
Here is the newcomer problem hiding in that paragraph. Shares are being held for you, in Israel, under an arrangement you never set up, may never receive a statement for, and did not choose. If you are a US person that has to be examined rather than assumed. The FBAR obligation covers a financial interest in, or signature or other authority over, at least one financial account located outside the United States where the aggregate value of those accounts exceeded USD 10,000 at any time during the calendar year reported, and its carve-out for an account that is part of a trust of which you are a beneficiary applies only where a US person, meaning the trust, its trustee or its agent, files an FBAR reporting that account (IRS guidance as at 25 August 2026) 18. Whether your particular trustee arrangement is a reportable foreign financial account turns on its own documents, which is exactly why the account details and the year-end value are worth asking the trustee for now rather than in April.
The same applies to your payslip paperwork. Israeli tax on this award is withheld by the trustee and the company together 3, and what your employer hands you at the end of the year is a tofes 106 (annual employer income statement) rather than a W-2. That withholding is Israeli tax, not US withholding. It produces none of the figures a US return asks for in the form it asks for them, and any US relief for it has to be claimed by you as a foreign tax credit under the Convention 11 rather than arriving automatically.
When does the trustee clock start, and what fixes the grant date?
It is anchored to the grant, not to your aliyah date and not to your vesting dates. The ITA's 2018 circular states that the legislature set a minimum period of two years during which the award must be held by the trustee for the employee to enjoy the preferential rate, and heads its own section "the grant date from which end of the period starts to be counted" 2.
Be careful about the exact end date, because the ITA's two published statements do not fix the same calendar day. The 2003 circular, setting out the same trustee conditions, puts the capital-track period at 24 months and the ordinary-track period at 12 months, in each case counted from the end of the tax year in which the shares were allocated and deposited with the trustee 1. The 2018 circular puts the minimum at two years and titles its section for the grant date from which end of period is counted, which reads as running from the grant itself 2. What both agree on is the anchor: the grant fixes the clock, and nothing about your arrival moves it. What they do not settle between them is whether the period runs from the grant or from the following 31 December, and on a September grant that is a difference of months. Ask your employer, and if the amount matters the assessing officer, for the end-of-period date on your own plan before you touch anything.
For a newcomer the practical version is short. Nothing about your landing date, your teudat oleh (new-immigrant certificate) or your first Israeli payslip moves this clock. It is set by a board resolution you were probably not in the room for.
The grant date is generally the date the board resolves on the allocation and its terms, with the target quantity, exercise price, expiry and vesting conditions fixed and no further discretion left to anyone. Where the board resolution does not set the vesting conditions out specifically enough, the ITA's position is that the decision has not yet ripened into an allocation for Section 102 purposes, and the date those conditions become clear is treated as the grant date for every purpose, including end of the period and the section 102(b)(3) computation 2. If more shares are ultimately allocated than the target quantity fixed at grant, the excess is a new allocation and the clock starts again on it 2.
Section 102 prescribes no vesting period and no vesting conditions; those are the company's choice 2. The trustee period and the vesting schedule are two separate clocks, and conflating them is the most common mistake made by people reading their grant letter for the first time. Acceleration written into the grant terms in advance, on an exit or an IPO, does not by itself breach Section 102, but acceleration triggered by a termination outside an exit or IPO produces employment income at sections 121 and 121B rates 10.
ISRAELI TREATMENT: what do you pay, and when?
Nothing at grant and nothing at vest: on both trustee tracks the charge arises at realization rather than at allocation 1. The Israeli tax event is the "realization date", which for a trustee allocation is the date the share is transferred from the trustee to you or the date the trustee sells it, whichever is earlier 4. Converting an option into a share is not a realization, so exercising into a share that stays with the trustee is not itself the event 1 4. Asking the trustee to move the shares into your own name is.
That last line is where newcomers get caught, because the Israeli event is an administrative request rather than a sale. Consolidating paperwork after you arrive, or unwinding an Israeli arrangement when you move on, is exactly the moment somebody asks the trustee to put the shares in their own name, and on the capital track doing that before end of period costs the entire rate difference 1 4. It also fixes the year. Every cross-border section below turns on which tax year the Israeli charge lands in, and that year is chosen by whoever makes the request, not by your vesting schedule.
On the capital track the benefit value is taxed at 25% 1 4. Above that sits section 121B in two layers, both stated by the ITA in its position paper of 28 July 2025: a 3% surtax that has run since 1 January 2013 on the part of an individual's taxable income for the tax year above a ceiling the ITA states as NIS 721,560 for tax year 2025, and a further 2% since 1 January 2025 on taxable income from capital sources above that ceiling. The ITA's position is that the 2% applies to the capital component of a Section 102 realization and not to the ordinary components 5. As at that July 2025 position, the stack on the capital track topped out at 30%. Check the ceiling published for the year you actually realize in, and note that it is measured against your taxable income for the whole tax year, so how much other Israeli taxable income you have in the year of the sale changes how much of the benefit clears it 5.
Realizing before the end of the period is expensive on the capital track. A voluntary realization before end of period is treated as ordinary income under section 2(1) or 2(2) at regular marginal rates, and the employer gets no deduction for it 1. On the ordinary track a voluntary early realization is charged instead at the higher of the tax that would have applied at the grant date plus linkage differentials and interest, or the tax applying at the realization date 1. An involuntary realization is treated differently and more kindly: on inheritance or a sale in bankruptcy proceedings the shares are treated as though the trustee had held them to the end of the period, with end of period deemed to be the day of that sale 1.
WHAT ALIYAH CHANGES ON THE ISRAELI SIDE: does your ten-year exemption cover this?
No, and this is the single most expensive misunderstanding an oleh can carry into an Israeli equity grant. The section 14(a) exemption covers foreign-source income. The ITA's circular of 11 November 2025 states the sourcing rule arithmetically: the profit on realizing an employee option, multiplied by the days on which the work was performed in a given country during the vesting period, divided by the number of days from the start to the end of the vesting period, is the profit produced in that country, and where the Israeli slice belongs to a new or veteran returning resident only the remainder is treated as produced abroad and exempt under section 14(a) 6. A grant made by an Israeli employing company for work done in Israel after you landed has no foreign slice at all. It sits outside the ten-year window from your first day. The general proposition is covered in the ten-year exemption guide and in windfall timing and the exemption window.
There is, though, a benefit only a newcomer can have, and it cuts through the middle of your award. The temporary order under the Law for Encouraging Aliyah to Israel and Return to It exempts eligible personal-exertion income produced in Israel for a new oleh or a veteran returning resident who became Israeli resident between 5 November 2025 and 31 December 2026, across tax years 2026 to 2030. Per ITA Circular 07/2026 of 5 July 2026, the enacted ceilings are NIS 600,000 for 2026, NIS 1,000,000 for each of 2027 and 2028, NIS 350,000 for 2029 and NIS 150,000 for 2030, with the 2026 ceiling pro-rated by the days from your arrival to the end of the year over 365 7. The Ministry of Aliyah and Integration's English questions-and-answers page, updated 23 June 2026, repeats those ceilings and adds a reduced ceiling of NIS 140,000 a year where the income is paid by a family member, a limit Circular 07/2026 sets out too 7 8. The same Q&A records an anti-abuse rule with teeth: someone who ceases to be an Israeli resident in 2028 or 2029 and spends fewer than 75 days in Israel across those two years loses the order's provisions altogether 8. Someone who becomes Israeli resident from 1 January 2027 is outside this order entirely and keeps only the standing reliefs. The order's general mechanics are covered in Israel's 2026 tax reform for olim.
The equity question the order raises is open, and it must be put to an assessing officer rather than assumed. "Eligible income" is defined as taxable personal-exertion income under section 2(1) or 2(2), and it excludes "other income" as defined in section 62A(d), whose list expressly includes proceeds from the sale of an asset as defined in section 88 7. The capital component of a Section 102 award is a section 88 capital gain and is plainly on the wrong side of that line. The ordinary components are section 2(1) or 2(2) income and are inside the definitional gate on their face, but Circular 07/2026 does not mention Section 102, options or equity compensation anywhere in its sixteen pages, and it does not address whether a benefit that crystallises years after the work counts as arising from personal exertion 7. If the ordinary components do qualify, then for a qualifying newcomer inside that window, and only for a qualifying newcomer, the "expensive" Israeli ordinary track can be the cheaper one. That is a sentence no lifelong Israeli would ever be handed.
Two administrative points follow. A benefited individual applies for teum mas (tax coordination) or a reduction of advances on a dedicated version of Form 116 that Circular 07/2026 designates 116ayin, which replaces the ordinary Form 116 and carries everything the ordinary one does plus credit points and multi-employer coordination 7. That route also carries a presence screen aimed at people who never really left: in each of the years 2016 to 2025 neither you nor your spouse may have spent more than 90 days in Israel, with a narrow allowance to breach that in up to three of those years 7. The form cannot be filed without a teudat oleh or a returning-resident certificate from the Ministry of Aliyah and Integration, a traveller-details entry-and-exit certificate from the Population and Immigration Authority covering 2016 to 2025 for you and your spouse, and a printout of the ITA's days-of-presence simulator, which the circular makes a necessary condition for the request to be processed at all 7. And the advance relief itself is capped below the statutory ceiling: Circular 07/2026, of 5 July 2026, sets it at NIS 500,000 for a full tax year if you are registered as required to file an annual return and NIS 300,000 if you are not, pro-rated the same way in your arrival year, with any remaining exemption claimed in the annual return 7.
If you later leave Israel, section 100A treats you as having sold all your assets the day before residence ends. Its definition of "asset" expressly names rights granted under sections 3(i) and 102, and the ITA reads that as catching Section 102 shares granted both before and after the 2003 amendment that created the current section 1. That mechanism is covered in the Israeli exit tax on leaving.
TREATY LAYER: what does the US-Israel Convention actually give a US-citizen oleh?
Less than most people assume. The saving clause is Article 6(3) of the Convention, whose own table of articles titles Article 6 "General Rules of Taxation", and it provides that notwithstanding any provision except paragraph (4), a Contracting State may tax its residents and its citizens as if the Convention had not come into effect. Article 6(4)(a) preserves the benefits of a short list of articles, and the one that matters here is Article 26, Relief from Double Taxation 11. So the Convention does not switch the United States off. It gives you a credit and a set of sourcing rules.
Article 26(1) allows a US citizen or resident a credit against United States tax for the appropriate amount of taxes paid or accrued to Israel, subject to the limitations of US law, and directs that the rules in Article 4, Source of Income, apply for that purpose 11. Article 4(7) sources income received by an individual for the performance of labor or personal services to a Contracting State only to the extent the services are performed there, and Article 4(6) sources income from the disposition of personal property to a Contracting State only if the disposition is within that State 11. The general mechanism is covered in double tax relief and the foreign tax credit and in tax treaties.
IF YOU ARE A US CITIZEN: why can the cheaper Israeli track cost you more?
Because the two countries tax the same award in different years, and a credit cannot travel backwards more than one year. Israel's event on the trustee route is the trustee's transfer or sale, whichever is earlier 4. The US event is earlier: property received for services is included at fair market value when you receive it unless it is subject to a substantial risk of forfeiture, in which case it is included when it becomes substantially vested, and a nonstatutory option whose fair market value is not readily determinable at grant produces no income until you exercise or transfer it 12 13. On a private Israeli company with a multi-year trustee hold, those dates are routinely years apart, and unused foreign taxes carry back one tax year and forward ten (IRS guidance as at 25 August 2026) 14 16. An Israeli charge in year five cannot reach a US inclusion in year one.
The character and basket mismatch compounds it. Israel classifies the benefit on the capital track as a capital gain at 25%, other than the ordinary slice that section 102(b)(3) carves out on a listed company 1 4 5. The US splits the same economics into compensation, which the Form 1116 instructions place in general category income, and later appreciation, which is capital gain and generally passive category income, and each category needs its own Form 1116 15. That split is not automatic either: the same instructions pull income out of the passive category where the foreign tax you paid on it exceeds the highest US tax that can be imposed on it 15, which a 25% Israeli charge can do. On the compensation half the US sources by time, not by residence: compensation other than fringe benefits is sourced on a time basis, and multi-year compensation, meaning an amount included in income in one tax year but attributable to a period spanning two or more, is in most cases sourced over the period it is attributable to, by days worked in each country 15 16. That is the American mirror of the ITA's own vesting-period workday formula: both apportion by days worked in each country over the period the award is attributable to 6 16. What the two systems do not share is the year in which they ask the question.
There is one useful escape on the gain half. Gain on the sale of personal property is normally sourced to the residence of the seller, but a US citizen with a tax home in a foreign country is treated as a nonresident for sourcing a sale of personal property if an income tax of at least 10% of the gain on the sale is paid to a foreign country, per Publication 514 for 2025 returns 16. A 25% Israeli charge clears that 10% test comfortably, though the application is fact-specific and belongs to a preparer with your documents in front of them.
Three more US-side items catch olim, and one non-item. The foreign earned income exclusion, which requires either bona fide residence in a foreign country for an uninterrupted period including an entire tax year or physical presence there for at least 330 full days in any 12 consecutive months, does not cover payments received after the end of the tax year following the year the services were performed, so equity that vests two or more years after the work can fall outside the exclusion even where the same person's salary is inside it (IRS guidance as at 25 August 2026) 17. Form 8938 thresholds for a taxpayer living abroad are more than USD 200,000 on the last day of the tax year or more than USD 300,000 at any time during the year if you are not filing jointly, and more than USD 400,000 or USD 600,000 on a joint return, and Form 8938 is in addition to the FBAR rather than a substitute for it (IRS guidance as at 25 August 2026) 19. The calendar for both is covered in the US compliance calendar. The non-item: whether your grant is also a statutory option, an incentive stock option or an option under an employee stock purchase plan, is decided by US law and your plan's terms 13, independently of the Israeli track your employer elected, so both classifications have to be checked and neither answers the other.
And PFIC, briefly, because the tests are applied at entity level and re-applied annually: a foreign corporation is a PFIC if 75% or more of its gross income for the tax year is passive, or at least 50% of the average percentage of its assets produce passive income or are held for the production of passive income 20. Ordinary operating employer stock is not normally a PFIC, but a pre-revenue Israeli company holding a large funding round in interest-bearing deposits can meet the asset test on its own numbers, and that is not something you control or are told about. Whether Form 8621 is required, and how its exception to completing Part I for a section 1291 fund applies where the shareholder's PFIC stock is worth USD 25,000 or less, or USD 50,000 or less on a joint return, and no excess distribution or disposition gain arose that year (as at 25 August 2026), belong to a cross-border preparer 20. For pooled funds, which is the far more common trap once the proceeds land, see the PFIC problem and the account order for an oleh.
IF YOU HOLD A UK PASSPORT: does the UK keep taxing this?
Generally not on a grant made after you go, once you have genuinely broken UK residence, which is the off-ramp a US citizen never gets. Under HMRC's published guidance as at 25 August 2026 you are usually non-resident where you spent fewer than 16 days in the UK, or fewer than 46 if you were not UK resident in the three previous tax years, or where you worked abroad full-time averaging at least 35 hours a week and spent fewer than 91 days in the UK of which no more than 30 were working days. The year of the move is usually split into a non-resident part and a resident part 22.
What the UK keeps is the UK-duties slice of what you already had. For employment-related securities options, HMRC's manual states that under ITEPA 2003 section 41G(8) the relevant period begins with the day of acquisition of the option and ends with the day of the chargeable event or, if earlier, the day the option vests, with staged vesting treated as occurring at separate times for the relevant parts of the option 21. A Section 102 option acquired entirely after aliyah, from an Israeli employing company, has a relevant period that contains no UK working days at all, assuming you perform no UK duties inside it. Read the American section above for context, not for instructions: almost none of it applies to you.
OTHER PASSPORTS: what if you came from Canada, South Africa, France or Australia?
This page puts no Canadian, South African, French or Australian rule on the record, because none of them is settled by Israeli law and no CRA, SARS, DGFiP or ATO source was read for it here. What is worth saying is where the live question sits. For these origins the pressing item is rarely the Israeli grant you receive after you land; it is the position you left behind on the way out, and that is what the country pages cover: Canada's departure tax and deemed disposition, the South Africa-Israel tax treaty, France for olim and Australia's CGT on departure. Take the Israeli sections above as they stand, and take the home-country half from your own country's page and from a preparer who works in that system.
What does one grant actually look like, side by side and year by year?
It looks like separate clocks running over the same 4,000 shares, and the table below sets out which event starts which one before the arithmetic follows.
| Israel | If you are a US citizen | If you hold a UK passport | |
|---|---|---|---|
| When is the tax event? | Trustee transfer to you, or trustee sale, whichever is earlier 4 | When restricted property substantially vests, or on exercise of a nonstatutory option whose value was not readily determinable at grant 12 13 | At the chargeable event, with the amount apportioned across the relevant period 21 |
| Does changing residence end it? | No. Section 100A deems a sale the day before residence ends, and names section 102 rights as assets 1 | No. Article 6(3) lets the US tax its citizens as if the Convention had not come into effect 11 | It ends new UK exposure once you are non-resident under the Statutory Residence Test, but the UK keeps the UK-duties slice inside the relevant period 21 22 |
| What decides the source? | Days worked in each country over the vesting period 6 | Services performed in that State under Article 4(7), with compensation sourced on a time basis 11 15 16 | The relevant period, from acquisition of the option to the chargeable event or, if earlier, vest 21 |
Now the arithmetic. Dana lands in March 2026, joins an Israeli company in June, and on 15 September 2026 the board grants her 4,000 options at an exercise price of NIS 50, on the capital-gains track through an approved trustee, under a plan filed with the assessing officer on 10 August 2026, thirty-six days ahead of the grant and so clear of the 30-day minimum 1 3. Her options vest in a single tranche on 15 September 2027. A four-year schedule is far more common; a single vesting date keeps the arithmetic readable, and Section 102 prescribes no vesting schedule at all, so the company is free to set either 2.
Her clocks run separately. Vesting completes on 15 September 2027. The trustee period is anchored to the 15 September 2026 grant date and ends either two years after that date or at the end of 2028, depending on which of the two ITA counting statements above applies to her plan, which is exactly why she asks for the date in writing. Israel taxes nothing at grant and nothing at vest 4.
She exercises all 4,000 options in October 2027 and the shares go straight to the trustee. There is still no Israeli tax, because converting an option into a share is not a realization and the realization date turns on the share leaving the trustee or being sold by it 1 4.
The trustee sells all 4,000 shares in 2032 at NIS 300. Benefit value is 4,000 x (300 - 50) = NIS 1,000,000. At 25% that is NIS 250,000 of Israeli tax 1 4, before the section 121B layers described above 5.
The counterfactual that costs the most: had she asked the trustee in November 2027 to move the shares into her own name, that transfer would itself have been the realization date 4, and on either counting basis it falls before end of period. That is a voluntary realization before end of period on the capital track, taxed as ordinary income at marginal rates instead of at 25%, with no employer deduction 1. The benefit would also have been measured at that earlier date rather than at the 2032 price, so the two totals are not directly comparable. The rate gap is. Taking the ITA's own worked assumption in its circular of 11 November 2025, a 47% marginal rate plus the 3% surtax on high income 6, and assuming the whole benefit sits above the section 121B ceiling, a NIS 1,000,000 benefit carries NIS 500,000 on that footing. Hold the same assumption against the capital track and the comparison is 25% plus the 3% surtax plus the 2% capital-source layer, or NIS 300,000 5. Those are top-of-the-scale rates, not averages, and both figures move with the ceiling published for the realization year, but the direction is not in doubt: on the rates as published, waiting out the trustee period is the highest-value move in the whole sequence.
One thing pulls the other way for Dana specifically, and it is the open question from the aliyah section above rather than a settled answer. She became Israeli resident in March 2026, inside the temporary order's window, so if the ordinary components of a Section 102 award do turn out to be eligible personal-exertion income, an ordinary-rate charge landing in 2027 would sit under that year's NIS 1,000,000 ceiling 7. Circular 07/2026 says nothing about equity compensation, so nobody in her position should act on that without putting it to an assessing officer first. It is, though, the reason a qualifying newcomer cannot read the rate gap above the way a lifelong Israeli would.
Now make Dana a US citizen and change nothing else. Her October 2027 exercise produces a US inclusion of 4,000 x (200 - 50) = NIS 600,000 of compensation, taking an illustrative fair market value of NIS 200 a share at exercise and assuming the shares are substantially vested when she receives them 12 13. Israel taxes nothing in 2027. In 2032 Israel charges NIS 250,000 on a base of NIS 1,000,000, while the US, working from a basis of NIS 200 a share after the 2027 inclusion, measures only the further appreciation, 4,000 x (300 - 200) = NIS 400,000, as capital gain. The Israeli tax arising in 2032 can be carried back one year, to 2031, and forward ten 14 16. It cannot reach the 2027 inclusion at all, and in 2032 there is comparatively little US tax left on the residual gain for it to absorb.
That is why the inversion is real. The 25% track minimises Israeli tax, and minimising the Israeli tax is precisely what removes the credit a US citizen needs against the earlier US charge. Where the Israeli and US events do fall in the same year, a larger Israeli charge on the ordinary track is what absorbs the US charge, while a 25% Israeli charge against an amount the US treats as wages can leave residual US tax on the same slice. None of that calculation is available to your Israeli colleague, and none of it is decided by you: your employer elected the track before you saw the offer.
What if the equity came from your old employer abroad?
Then you are in different territory, and it belongs to RSUs and stock options for olim, which covers the foreign grant you carried into aliyah mid-vesting. One update that page predates is worth flagging here, because the two pages will otherwise read as if they disagree. Section 5 of ITA Circular 09/2025, published 11 November 2025, lets the company apply to the Employee Options Department in the ITA's Professional Division to switch a section 3(i) option grant onto the Section 102 capital-gains track through a trustee. The date treated as the grant date of the replacement options is the date of the application for a green-track tax ruling, provided the options are deposited with a trustee within 30 days of that date, and that deemed date then serves for every purpose including end of the period and the section 102(b)(3) computation 6. Back-dating remains impossible, which is what that page is right about. A prospective, company-initiated switch is not, and it is the company that has to ask.
Before you sign anything, price the whole package and not just the equity line: how to evaluate an Israeli job offer walks through the pension, keren hishtalmut (training fund) and severance layers that sit alongside it.
Frequently asked questions
Section 102 lets an Israeli employer hold share or option grants with an approved trustee and taxes you once, at realization: 25%, salary rates, or a split of the two. The clock runs from the grant date, not your aliyah. Your ten-year exemption does not reach this income, and a US passport can invert which track is cheaper.
No. The ten-year exemption under section 14(a) covers foreign-source income, and the ITA determines where option income is produced by the days worked in each country during the vesting period. Equity granted by an Israeli employing company for work you did in Israel after landing has no foreign slice, so it sits outside the exemption from your first day as a resident. The exemption is still valuable for genuinely foreign income; it simply does not reach this.
At the realization date, which for a trustee allocation is the date the share is transferred from the trustee to you or the date the trustee sells it, whichever is earlier. There is no Israeli tax at grant, none at vest, and none when an option is exercised into a share that stays with the trustee, because the ITA treats converting an option into a share as something other than a realization. Asking the trustee to register the shares in your own name is itself the tax event, even if you sell nothing.
Neither. It is anchored to the grant date, and the vesting schedule is a separate clock set by the company, since Section 102 prescribes no vesting period at all. Be careful about the exact end date, though: the ITA's 2018 circular describes the minimum period as two years counted from the grant date, while its 2003 circular counts 24 months on the capital track from the end of the tax year in which the shares were allocated and deposited. Those are not the same day on a September grant, so ask your employer, and if the amount is large the assessing officer, to confirm the date on your own plan.
On the capital-gains track a voluntary realization before the end of the period is treated as ordinary income at regular marginal rates rather than at 25%, and your employer loses its deduction for the award. On the ordinary track an early voluntary realization is charged at the higher of the tax that would have applied at the grant date plus linkage differentials and interest, or the tax at the realization date. An involuntary realization is treated more kindly: on inheritance or a sale in bankruptcy proceedings the shares are treated as though the trustee had held them to the end of the period.
Not on your own, and not for a grant already made. One track is elected per plan by the company, notified to the assessing officer at least 30 days before the grant date, and the plan and trustee are then approved by the assessing officer, with approval deemed given after 90 days of silence. The company has to keep to that choice for further trustee allocations until the end of the year after the allocation year, and only after that can it apply in advance for approval to put future allocations on the other track. Your existing grant stays where its plan put it. A separate company-initiated route exists to move a section 3(i) grant onto the Section 102 capital track prospectively, but that also runs through the ITA's Employee Options Department and the company has to apply, not you.
Part of the answer is clear and part is open. The order defines eligible income as personal-exertion income under section 2(1) or 2(2) and excludes other income under section 62A(d), whose list expressly includes proceeds from the sale of a section 88 asset, so the capital component of a Section 102 award is outside it. Whether the ordinary components qualify is not addressed anywhere in ITA Circular 07/2026, which does not mention equity compensation at all, so it is a question to put to an assessing officer rather than an assumption to build on.
There is no general answer, and the structural point matters more than the rate. Israel taxes the trustee route at transfer or sale while the US taxes at vest or exercise, and unused foreign taxes carry back only one tax year and forward ten, so an Israeli charge arriving years later can be stranded regardless of track. Where the two events do land in the same year, a larger Israeli charge is what absorbs the US one, which is why the cheaper Israeli track is not automatically the cheaper outcome for you.
It has to be examined rather than ignored, and the answer is fact-specific. The FBAR obligation reaches a financial interest in, or signature or other authority over, a foreign financial account where the aggregate exceeds USD 10,000 at any time in the calendar year, and the IRS carve-out for an account that is part of a trust of which you are a beneficiary applies only where a US person, meaning the trust, its trustee or its agent, files an FBAR reporting that account. Since you never set up the arrangement and may never see a statement, the practical step is to ask the trustee for the account details and the year-end value, and to give both to whoever prepares your US return.
Section 100A treats a person who ceases to be an Israeli resident as having sold all their assets on the day before the residence change, and its definition of asset expressly names rights granted under sections 3(i) and 102. The tax attaches to the part of the gain attributable to the period you held the asset as an Israeli resident, and it can be deferred until you actually sell to a third party.