Israel | IRS tightens oversight of options for high-tech workers

The IRS announced that, starting January 1, 2025, companies that grant stock options to their employees will be required to report each step of the process through a new online platform.

Differences in the mechanism for exercising options have a significant difference in taxation. If the option is treated as part of the salary, tax is charged at the income tax rate, which reaches 50%. However, in certain cases, the exercise of an option is treated as a capital market transaction and is then subject to capital gains tax of 25%.

The new reporting mechanism called for increasing the transparency of taxation in this area and the cost of differences in taxation approaches for the state budget.