Section 102: Israel Reporting Requirements for 2025 Onwards

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.