Introduction
Israel’s high-tech industry is booming — innovative, international, and generous with compensation packages. Beyond the base salary and bonuses, RSUs (Restricted Stock Units) have become a cornerstone of employee rewards in Israeli startups and subsidiaries of global companies.
But while RSUs are common, their taxation remains misunderstood, especially for employees who’ve moved countries or changed their tax residency. The result? Many end up paying more tax than they should… or lose out on significant refunds they didn’t know they could claim.
This article breaks down what RSUs really are, how they’re taxed in Israel, why this creates problems for many, and how a smart tax strategy can save you thousands of shekels.
What Are RSUs, and Why Do They Matter?
RSUs are a form of equity compensation — company shares granted to an employee but delivered over time, through a vesting schedule. The goal? Retain talent, loyalty, and align employees with long-term business growth.
For example:
You’re granted 4,000 RSUs vesting over four years — 25% each year. Once vested, those shares are yours to keep or sell (sometimes with restrictions).
This is standard practice across Israel’s tech sector. But the challenge comes with taxation.
How Are RSUs Taxed in Israel?
Here’s the key: in Israel, RSUs are taxed at the moment they vest, i.e., when you legally receive the shares. At that point:
- The market value of the shares becomes part of your taxable income.
- It’s treated as salary (even if it feels like a bonus or equity gain).
- You may owe up to 50% in income tax, plus social security and other surcharges.
- The employer/platform (e.g. IBI) often withholds tax automatically — assuming you’re a standard an Israeli tax resident.
And this assumption is often wrong.
The Problem: Mistaken Taxation for Non-Residents or Olim
Let’s say you moved away form Israel., or you recently made Aliyah and were awarded RSUs for work performed before moving to Israel. In either case:
- You might not be an Israeli tax resident anymore.
- Your RSUs might be tied to work done abroad.
- You might be covered by a 10-year tax exemption as a new immigrant (Oleh Chadash).
Yet, in many cases, Israel taxes the full RSU value anyway, because the system assumes you’re still liable. That’s how people end up unfairly losing tens of thousands of shekels.
Are You Being Over-Taxed on RSUs?
If your RSUs are taxed at the full rate — and you’ve lived or worked abroad during the vesting or work period — the system may have overcharged you. The platforms that manage RSUs don’t track your residence status or your unique timeline.
That’s where a tax professional can make a major difference.
Can You Get a Tax Refund on your RSU income?
Israeli tax law provides legal channels to contest incorrect withholding. You may be eligible for a partial or full refund if:
- You provide proof of non-Israeli tax residency.
- You demonstrate when and where the RSU-earning work was done.
- You qualify for a special exemption (e.g., olim tax break).
- You file within the allowed time window (up to approx. 6 years retroactively).
Even if taxes have already been withheld — much of it may be recoverable.
Take Action: Don’t Let Your RSUs Become a Tax Trap
RSU’s are a powerful financial asset — but without a proper tax strategy, they can turn into an unexpected liability.
If you’re working in tech, living abroad, or made aliyah recently, it’s critical to review how your RSU’s have been taxed. Don’t assume the system got it right — in our experience, it often doesn’t.
Get a Free Tax Audit
We offer a free audit of your RSU tax situation. We’ll help determine:
- If you’re eligible for a refund,
- How much you might reclaim,
- And how to build the strongest case.
You could be entitled to thousands of shekels — don’t leave that money unclaimed.
📞 Ready to explore your options? Contact us today.
