Europe
Section 102: Israel Reporting Requirements for 2025 Onwards
Section 102 compliance in Israel just got serious. Discover key 2025 deadlines for Form 146 and 156, risks of non-compliance, and how to stay audit-ready.
TL;DR
- Section 102 allows equity to be taxed at a reduced capital gains rate (up to 30%) instead of higher income tax (up to 50%)
- New reporting obligations in Israel for 2025 are strict:
- Form 146: Quarterly report on all new equity grants, due 120 days after the quarter’s end.
- Form 156: Annual summary of all equity activity, due April 30 (or Oct 1 for the 2024 report).
- Missing a deadline or filing with errors can cause disqualification from Section 102 benefits, resulting in higher taxes, interest charges, and penalties.
- Slice automates Form 146 & 156 reporting, integrates with your HR system, and provides proactive compliance alerts to prevent errors.
Why Section 102 Matters
If your company has employees in Israel and offers equity compensation, then you know that Section 102 of the Israeli Income Tax Ordinance is the backbone of your tax-advantaged equity strategy. It provides favorable tax treatment, allowing employees to be taxed at a reduced capital gains rate (up to 30%) instead of higher income tax rates (up to 50%) and social security charges (up to 12.17% for the employee’s portion).
But these tax benefits are not an automatic guarantee. Starting in 2025, securing them will depend on meeting new, stricter quarterly and annual filing requirements that companies cannot afford to ignore. For CFOs, General Counsels, and anyone responsible for managing company equity programs, mishandling this new reporting cadence can lead to a loss of favorable tax treatment, interest charges, and penalties that put your entire equity plan at risk.
This article outlines what’s changing, how to avoid costly missteps, and how Slice Global makes compliance a non-issue
Why These New Reporting Requirements Exist
Until recently, Section 102 compliance operated in a kind of gray zone. Companies would submit equity plans to the Israeli Tax Authority (ITA), assume they were accepted unless challenged, and only discover potential issues during diligence that often came years later. That’s no longer the case today.
Starting in 2025, plans must be filed electronically with the ITA, along with new quarterly and annual reporting requirements that give regulators real-time oversight into how equity plans are administered.
These new rules: Form 146 (quarterly) and Form 156 (annual), are the mechanism by which your equity grants remain compliant with Section 102. Miss one deadline, file incorrectly, or omit required data, and your team’s stock options may be reclassified from capital gains to ordinary income.
In this next section, we’ll walk through what these filings actually require, when they’re due, and what’s at risk if you get them wrong.
Form 146 (Quarterly)
Form 146 is a mandatory quarterly report summarizing all equity grants made during that quarter.
- Deadline: 120 days after the end of each quarter.
- Applies to: All stock options and other equity instruments issued under Section 102.
Data required
- Grant date
- Full employee details (name, ID, address)
- Type and quantity of instruments
- Vesting and expiration details
- Exercise price or payment value
- Deposit date with trustee
- Listing status (if applicable)
Failure to file on time or with accurate data can disqualify the grants from Section 102 benefits, meaning the higher tax burden will apply.
Form 156 Reporting (Annual Summary)
Form 156 is the annual summary of all equity activity and the cornerstone of your Section 102 tax reporting requirements.
- Deadline: April 30 of the following year.
- Extension for 2024: The deadline for the 2024 report is extended to October 1, 2025.
Must Include
- Opening and closing share balances for the year
- Share transactions (e.g., transfers, sales, inheritance)
- Bonus shares or additional rights granted
- Employee departures and residency changes
- Dividend payments
- Realization events (details on exercises, sales, and tax paid)
- Listing status, if the company went public
This form provides the Israeli Tax Authority with a comprehensive view to validate that your equity plan is being run by the book. A mistake here can ripple through audits, due diligence, and employee tax filings.
What’s at Stake?
Understanding the forms and their deadlines is only half of the equation. The other half is grasping what actually happens when compliance slips through and how those mistakes create consequences for your company and employees.
Equity Disqualified from Section 102 Benefits
If you miss a deadline or file with incorrect data, your grants can be disqualified. This means employees lose the favorable capital gains treatment and instead face higher income tax rates (up to 50%) and social security charges. This leaves you in the "uncomfortable” position of having to explain why the promised tax benefit was lost.
Compliance Failures Ripple Through the Business
A misstep in reporting can "ripple through the entire reporting chain," affecting coordination between your company and the trustee. For companies that are scaling fast or preparing to go public, a clean, audit-ready compliance record is essential.
Any errors or gaps can create significant friction and risk during critical business events.
Loss of a Key Incentive Tool
Section 102 is an incredible tool for aligning employee and company incentives. When the tax benefits are lost due to compliance failures, that alignment is broken. The company faces not only potential interest charges and penalties but also a breakdown in trust with the team it is trying to motivate and empower.
Examples of What Can Go Wrong
Case 1: The Forgotten Form 146
A late-stage Israeli startup forgets to file its Q1 Form 146 with the ITA on time. As a result, equity grants for 18 new hires lose their 102 “tax track” benefits. The company must either gross up the tax difference for employees or deal with employee dissatisfaction, possible attrition, and reputational damage.
Case 2: The Early Option Grant
A company issues options to new employees, but because the 30-day waiting period after submitting Form 102 to the ITA was not observed, the grants are not qualified under the “trustee track.” Employees lose significant tax benefits, facing immediate tax at grant or vesting, and the company faces extra reporting obligations and an angry staff.
Case 3: Non-Qualified Grantees
A company carelessly grants Section 102 options to advisors and consultants, not just employees. Since Section 102 applies only to employees and office holders (excluding controlling shareholders), the grants are not recognized by the ITA as tax-advantaged. The advisors face immediate tax liabilities as if they’d received cash, and the company risks penalties and reputational damage.
Why Manual Reporting Doesn’t Work Anymore
Manual reporting can’t keep up with equity compliance in 2025. Spreadsheets and ad-hoc processes fail because every function, HR, Legal, Finance, all need to be synchronized with real-time data:
- HR must track instant residency shifts when employees move.
- Legal must file accurate Form 146 and Form 156 without gaps.
- Finance must align reporting with audits and IPO readiness.
- Trustees need structured, timely data to file on the company’s behalf.
One manual error can disqualify equity, trigger tax penalties, or derail a liquidity event. Startups rarely have the margin to absorb that kind of risk.
How Slice Automates Section 102 Compliance.
Built-in Compliance Alerts. Slice flags upcoming Form 146 deadlines, missing data, and errors before they happen.
Auto-Generated Reports. All required data for Form 146 and 156 reports are auto-generated in the structured format mandated by the ITA.
HRIS Integration. Slice syncs with your HR system to track employment periods and residency changes, critical for employee equity taxation in Israel.
Tax Event Tracking. Exercise, sale, and tax realization events are logged and connected to proof documents that are essential for equity plan tax reporting.
Audit-Ready Records. Slice maintains a full audit trail, time-stamped and exportable, for investors, trustees, or the tax authority.
FAQ: Section 102 Israel Reporting
What is the Form 146 deadline for 2025?
120 days after each quarter ends (e.g. Q1 ends March 31 → file by July 29).
What’s the Form 156 deadline?
April 30, 2025 (extension for 2024 filings: October 1, 2025).
What if we miss a deadline?
Affected grants lose Section 102 benefits permanently.
Who is responsible for filings?
The company and its designated trustee share legal responsibility.
Can we manage this manually?
You can, but the risk is too high. Compliance errors now have direct tax and legal consequences.
How does Slice help?
Slice automates filings, integrates with HR, tracks tax events, and ensures you're always audit-ready.
In today's competitive tech landscape, attracting and retaining top talent across borders is crucial for startup success. For companies with a growing presence in Sweden, navigating the complexities of equity compensation can be a significant hurdle. This is where Qualified Employee Stock Options (QESOs) become critical. Although implementing QESOs involves navigating numerous requirements, the substantial tax advantages make them a highly rewarding solution for both companies and employees.
What are QESOs?
Qualified Employee Stock Options (QESOs) are a type of stock option specifically designed for companies with a Swedish presence to incentivize employees with equity in the company. The beauty of QESOs lies in their favorable tax treatment for both the company and the employee:
- Employee Benefits: Employees enjoy tax-free grants and are only taxed on capital gains at upon sale, typically at a rate of 25%.
- Company Benefits: Companies benefit from reduced social security contributions compared to traditional non-qualified stock options.
Difference Between QESOs and Non-Qualified Stock Options in Sweden
When considering stock options, it's essential to understand the differences between QESOs and non-qualified stock options in Sweden:
- Tax Event: For non-qualified stock options, there is a tax event upon exercise. Employees are taxed at progresive tax rate ranging between 30%-55% on the difference between the market price and the exercise price at the time of exercise.
- Withholding Obligation: Employers have a withholding obligation for non-qualified stock options. Employers must withhold the appropriate tax amount through salary in the month following the exercise.
- Social Security Contributions: Non-qualified stock options include a social security contribution obligation at a rate of 31.42%.
Key Requirements for QESOs
To benefit from the generous tax rules associated with QESOs, several strict requirements must be met. Here are the ten essential criteria for companies, stock options, and option holders:
Qualifying Conditions for Companies
- Fewer than 150 employees.
- No more than SEK 280 million in net Sales or balance sheet total.
- The company’s operations must not be older than 10 years.
- The company must not primarily engage in asset management, banking, financing, insurance, coal or steel production, real estate trading, long-term rental, or services related to legal advice, accounting, or auditing (“excluded activities”) for 3 consecutive years before the grant.
- Company must not be traded on a public stock market.
- Company cannot be direcly or indirectly controlled by a governmental body.
- The company must not be in financial difficulties.
- Company cannot be purely a holding company, and must undertake trade operations
Qualifying Conditions for Employees
- Be an employee or board member of the granting company or any subsidiary.
- Work a minimum of 75% of their working hours for the granting company or any subsidiary.
- Must earn a minimum salary of 13 “income base amounts” during the vesting period of 3 years after the grant date. The income base amount in 2024 is SEK 76,200.
- Employee, together with closely related affiliates, cannot own more than 5% of the voting rights or share capital of the granting company.
Beyond QESOs: Comparative Analysis
If you're familiar with the UK's Enterprise Management Incentive (EMI) scheme, you'll find striking similarities between QESOs and EMIs. Both programs have similar conditions and are designed to optimize tax benefits and encourage employee ownership, making them highly attractive for startups and growing companies looking to incentivize their workforce.
However, there are key distinctions that set QESOs apart, providing unique advantages:
- No Limit on Exercise Price: One of the most notable advantages of QESOs over EMIs is the absence of a cap on the exercise price. This means that employees can potentially benefit more from their options, as there are no restrictions on the price at which options can be exercised. This flexibility allows for greater potential for value creation, particularly in rapidly growing companies where share prices can increase significantly over time.
- Enhanced Flexibility and Applicability: The absence of exercise price restrictions allows for more customized compensation packages, appealing to a broader range of businesses and making QESOs a more versatile option across various sectors and stages of development.
Slice's Approach to QESO Management
At Slice, we offer a comprehensive solution for managing QESOs for Swedish employees, ensuring a streamlined and efficient process from creation through sale. Here's how we can assist:
- Value Alerts: We provide real-time alerts on the value of options upon grant, both for the company and the option holder. This ensures the company does not exceed the option value limitations.
- Exercise Period Management: Our platform tracks and manages exercise periods, ensuring timely notifications and helping option holders maximize their benefits within the allowed timeframe.
- Scope of Work Conditions: We monitor and enforce the scope of work conditions, ensuring compliance with employment and work hour requirements for QESO This helps maintain eligibility for tax benefits and other advantages.
- Relationship Management: Whether the option holder is an employee, board member, or has another type of relationship with the company, we ensure all relevant criteria and conditions are met and tracked accurately.
With Slice, managing QESOs becomes a seamless experience, allowing both companies and option holders to focus on growth and success.
Conclusion – Investing the Time to Grant QESOs in Sweden is Worth It!
Although granting QESOs in Sweden requires understanding the tax rules, company requirements, and employee conditions, the tax advantages it offers are significant. Investing time in implementing and managing QESOs is a worthwhile endeavor, enhancing employee compensation and driving growth.
Yarin Yom-Tov is a Product Tax Manager at Slice, where he integrates global tax laws into the company’s platform by transforming complex international regulations into proactive compliance insights and tax calculations. Prior to joining Slice, he practiced tax law at a leading law firm and a top-tier boutique, focusing on international taxation and strategic tax planning for both corporations and individuals. Yarin holds an LLB in Law and a BA in Economics from The Hebrew University of Jerusalem.
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