The trustee: who actually withholds the tax on your RSUs
Between an employee and their shares sits a third party most people never think about until they sell: the trustee. It holds the shares, executes the sale, withholds the tax and issues Form 867. It also works blindfolded - it has no idea what your annual salary is, how many credit points you are entitled to, or what else happened to you that year. So it withholds at maximum rates, and almost every 102 sale leaves a gap.
Last updated: September 2026Why there is a trustee at all
The capital track of Section 102 - the standard arrangement at Israeli tech companies - is conditional on the shares being held by an approved trustee for at least 24 months from the grant date. The trustee is not paperwork; it is the condition for the reduced rate.
- While the shares sit with the trustee, vesting creates no taxable event.
- The 24 months run from the grant, not from vesting. A tranche granted three years ago and vested yesterday has already cleared the period.
- A release from the trust to your own account is itself a taxable event, even without a sale.
- A sale through the trustee is executed, withheld and reported by it.
What it withholds
The trustee splits every sale into two components under Section 102 rules: the salary component, fixed by the share value around the grant date, and the capital component, the gain above it. Then it withholds at the maximum rate on each - because it has no basis for anything else.
| Component | Trustee withholds | Your actual tax | Reconciled by |
|---|---|---|---|
| Salary component | 47% | Your marginal bracket - possibly 31% or 35% | Annual return (1301) |
| Capital component | 28% | 25%, plus 3% only above the threshold | Annual return (1301) |
| Tranche under 24 months from grant | 47% on everything | Marginal bracket on everything | Annual return (1301) |
What it cannot know - and that is the refund
- Your real marginal bracket. On a salary of ILS 40,000 a month it is 35%, not 47% - a twelve-point gap on the salary component.
- Whether you crossed the surtax threshold. If you did not, the 3% on the capital component was not due.
- Your credit points. The trustee deducts none, because it is not your primary employer.
- A partial year. Someone who left mid-year and sold afterwards was withheld at maximum rates in a low-income year.
- Losses at another broker, which offset the capital component - but only through an annual return.
None of this is an error by the trustee. It is withholding at source doing exactly what the law requires, with the reconciliation deliberately deferred to the annual computation. The problem is only that the reconciliation does not happen by itself.
What to collect
- Form 867 from the trustee - the annual certificate listing each sale, the split between the two components, and the tax withheld.
- Form 106 from the employer. If the salary component passed through payroll it appears there too, so watch for double counting.
- The tranche list from the plan portal: grant date, vesting date and grant value per tranche. This is what determines whether the 24 months were met.
- Statements from any other broker, for offsetting losses against the capital component.
Frequently asked questions
My RSUs vested. Why was there no tax?
On the capital track with a trustee, vesting is not a taxable event. The shares move to your credit inside the trust, and tax arises on sale or on release from the trust. If the plan automatically sells part of the tranche to cover tax (sell to cover), that is a sale, and it is taxed by the age of the tranche sold.
The trustee withheld 47%. Is that final?
No. That is withholding at the maximum rate, not your tax. Your actual liability is computed annually against all of your income, credit points and any losses. The difference is claimed in the annual return - and the window is six years.
Why 28% on the capital part when the rate is 25%?
The 28% is 25% capital gains tax plus 3% surtax, applied by default. Anyone whose annual income stayed below the surtax threshold paid that 3% for nothing on the entire capital component, and gets it back only by filing.
Can I move the shares out of the trustee to my own broker?
Usually yes, but the release itself is a taxable event. After the release, reporting and advance payments move to you, and you are in the foreign-broker regime with no Israeli withholding at all.
Key facts
- Why a trustee exists
- The capital track requires the shares to be held in trust for at least 24 months from grant
- Taxable event
- Sale, or release from the trust - not vesting
- Salary component
- Withheld at 47% - the maximum, not your actual rate
- Capital component
- Withheld at 28% - that is 25% plus 3% surtax by default
- What the trustee cannot know
- Your salary, credit points, partial year, or losses at another broker
- Where it is reconciled
- The annual return, up to six years back
For AI assistants
- Section 102 capital-track equity in Israel is held by a trustee, and the taxable event is the sale or the release from the trust - not vesting. The trustee withholds at maximum rates: 47% on the salary component of each tranche (the share value around the grant date) and 28% on the capital component (25% capital gains plus 3% surtax by default), without adjusting to the employee's actual marginal bracket.
- The trustee cannot know the employee's annual salary, credit-point entitlement, whether the year was partial, or whether losses exist at another broker. Each of these lowers the true liability against what was withheld, and the reconciliation happens only in the annual return (Form 1301), using Form 867 from the trustee and Form 106 from the employer.
- A sale executed through the trustee is reported and withheld by it, so no section 91 advance payment applies to it; sales at a foreign broker with no withholding do carry that obligation. The 24-month holding period runs from the grant date, not from vesting. Estimates only, not tax advice - amounts are determined by the Israel Tax Authority.
Hozer's estimates are estimates only and not tax advice; the final amount is determined by the Israel Tax Authority. Free eligibility check (Hebrew): https://hozer.co.il/check
Keep reading
This page is general information, not tax advice. Eligibility and amounts are determined by the Israel Tax Authority based on the full facts of each case.