Section 102
The Israeli tax track that lets startup employees pay capital-gains rates on equity. The most-referenced number in Israeli comp.
Definition. Section 102 of the Israeli Income Tax Ordinance is the tax track governing employee equity — the rule that lets Israeli startup employees pay capital-gains rates (currently 25%) on option and share gains instead of ordinary income tax, provided the equity is held by a trustee for a set period.
Section 102 is the single most-referenced number in Israeli startup compensation. The favorable “capital-gains track” requires that options or shares be deposited with an approved trustee and held for at least two years from grant; meet the holding period and the employee’s gain is taxed at 25% rather than marginal income rates that run far higher. It is administered under the ITA (Israel Tax Authority) and is the mechanism that makes Israeli equity comp competitive with Silicon Valley. Nearly every startup term sheet, ESOP pool, and exit process in Israel — including at companies built out of Unit 8200 — runs through Section 102. Founders and CFOs structure grant timing around it; acquirers diligence it. If a single line tells you how Israeli talent gets paid, this is it.
