Generally, tax on sale, both for awards granted under non- trustee plan and under an approved (Section 102) trustee plan.
Under a non-trustee plan, employees are taxed at marginal rates on sale proceeds (minus purchase price). It may be possible to apply for a tax ruling providing for the taxable event to be at purchase rather than sale. In this case, marginal rates would apply to difference between purchase price and fair market value of shares at purchase, while capital gains tax rate would apply to any increase in value of shares between purchase and sale.
The employer may elect the capital gain method under an approved trustee plan. Under the capital gain method, employees are taxed at marginal rates on the difference between purchase price and market value of shares at purchase (or the difference between the sale proceeds and the purchase price, if less) and the remainder is taxed at capital gains rate.
Special deposit and lock up periods apply to trustee plans.
Note that the Israeli tax authorities offered two "green track" rulings for ESPP which provide a simplified process for obtaining the tax treatment explained above.
May be allowed with an approved trustee plan if subsidiary reimburses parent under written agreement. In such case, deduction is limited to the lesser of: (1) the reimbursement amount and (2) the portion of employee's gain that is taxed as ordinary income, i.e., the entire gain under the income method and a portion of the gain under the capital gain method - see Taxation of Employee section for further details. No expense will be allowed if the employee sells the underlying shares before the end of the two-year holding period.
Generally, not available with a non- trustee plan.
Income Tax:
Reporting and withholding at taxable event for non-trustee plans. Trustee is required to withhold and report at sale for approved trustee plan. In addition, an annual report of stock plan activity generally must be filed but filing obligation has been suspended.
Social Insurance Contributions:
Yes, employee and employer contributions due on non-trustee plans and on ordinary income portion under trustee plans (i.e., amount taxed at marginal rates), provided wage base is not exceeded.
Employer/trustee has to withhold employee's contributions.
Prospectus and reporting requirements generally apply if grants are made to more than 35 employees. The securities authorities are likely to grant an exemption under certain circumstances.
Self-executing exemptions may also apply to offers to more than 35 employees provided the value of the offering is under a specified threshold and certain other requirements are met.