If you’re an ESOP participant, you know that allocating options under section 102 of the Israeli Tax Ordinance can lead to some amazing tax benefits.
But did you know that there are some common misconceptions that companies have about options allocated in the capital gain route?
Here are three of them:
Misconception #1: Changing the terms of options by canceling the allocation and reallocating options with new terms is not a taxable event.
Reality: Actually, this is considered a taxable event by the ITA. So before you make any changes to the terms of your options, make sure to consult with a tax advisor to avoid any unwanted surprises.
Misconception #2: Options expire when the program ends.
Reality: This is not true. If the program is not canceled, the options remain valid. The company cannot allocate options from the program’s scope.
Misconception #3: Accelerating vesting at the end of employment doesn’t affect the capital gain route.
Reality: This is another common misconception. Accelerating vesting at the end of employment can actually disqualify the capital gain route, so it’s best to consult with a tax advisor before making any moves.
- This information is not legal advice, so it’s always a good idea to consult with a tax specialist about your specific circumstances.
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