How ESPP shares are taxed in Israel
An employee stock purchase plan lets you buy your employer's shares below the market price. Under Section 102 with a trustee, the tax depends on whether you sell before or after 24 months.
After 24 months: two parts
- The discount — the market value on the purchase date minus what you paid — is taxed as salary, with National Insurance and health tax.
- The gain since the purchase date — the sale price minus that market value — is a capital gain at 25%, plus surtax where it applies.
- What you paid for the shares is your own money, already taxed, and is never taxed again.
Before 24 months
Sell earlier and everything above what you paid is taxed as salary, at your marginal rate, with National Insurance and health tax.
When the price falls
If you sell below the market value on the purchase date, the salary part is limited to what you actually made over what you paid, and there is no capital gain.
An example
You buy 100 shares at $85 when the market price is $100, and sell them after 24 months at $150, with the dollar at ₪3.70 on both days. The discount, 100 × $15 × 3.70 = ₪5,550, is salary. The gain, 100 × $50 × 3.70 = ₪18,500, is a capital gain: ₪4,625 of tax at 25%. The ₪31,450 you paid is not taxed.
Frequently asked questions
Is the ESPP discount taxed in Israel?
Yes, as salary. On the Section 102 trustee track it is taxed when you sell, not when you buy.
When does the 24-month period start?
Moneta counts 24 months from each lot's purchase date, so lots bought at different times cross the line at different times.
What is the tax rate on the ESPP gain?
25% on the gain above the purchase-date market value, plus surtax on income above ₪721,560 a year.