TL;DR:
- Equity is sourced by workdays over the vesting period, not by where you live at sale.
- The Israeli-source portion stays taxable in Israel after you leave.
- Leave the shares with the Section 102 trustee to preserve the 25% track.
- Section 100A exit tax deems a disposal on the day residency ends; deferral is available by election.
- Treaty relief requires residency certificates and a defensible, contemporaneous day count.
Residency Ends Later Than You Think
Israeli residency is a centre-of-life test, not a date on a boarding pass. The ITA looks at where your family lives, where your home is, where your economic interests sit, and only then at day counts. Employees who relocate but keep an apartment, an Israeli bank account, and a spouse finishing a school year are frequently held to have remained resident for part or all of the first year abroad. Since residency determines whether the whole award or only a slice is taxable, settle this question first — the 183-day rule explainer sets out the tests.
The Sourcing Calculation
The workday allocation is arithmetic, and the ITA applies it mechanically:
Israeli-source portion = benefit at the tax event × (Israeli workdays during the vesting period ÷ total workdays during the vesting period).
Worked example
An employee is granted 4,000 RSUs vesting quarterly over four years. She works in Israel for the first 30 months and in Berlin for the final 18 months. Total workdays are approximately 1,040; Israeli workdays are approximately 650.
- Israeli share: 650 ÷ 1,040 = 62.5%.
- On a NIS 800,000 benefit at sale, NIS 500,000 is Israeli-source and NIS 300,000 is German-source.
- If the shares remained with the trustee for over 24 months from grant, the Israeli portion is taxed at 25% — roughly NIS 125,000.
- Germany taxes the German-source portion under its own rules, with treaty credit relief applied where the same slice is taxed twice.
The German and Israeli conventions for what counts as a workday are not identical, and the vesting-period definition can differ. Where the two countries overlap, the treaty's mutual agreement procedure is the formal remedy, but a consistent filing position on both sides prevents almost all of these cases.
Exit Tax Under Section 100A
Section 100A deems you to have sold your assets on the day before residency ends, taxing the gain accrued to that date. Two routes exist:
- Pay on departure — compute and settle the deemed gain immediately. Rarely attractive, and often impossible for illiquid startup shares.
- Defer to actual sale — the default election. On eventual sale, the gain is apportioned by time: the period of Israeli residency over the total holding period determines the Israeli slice.
Where the shares sit with a Section 102 trustee, exit tax and the 102 regime interact awkwardly, and the safe course for meaningful positions is a pre-ruling that fixes both the sourcing ratio and the withholding rate. The pre-ruling guide sets out the timetable; the full mechanics of departure are in our exit tax article.
Keep the Shares With the Trustee
Relocating employees often want to move their holdings to a local broker. Resist it. Releasing shares from the Section 102 trustee is itself a tax event, can break the 24-month condition if it happens early, and removes the withholding mechanism that keeps you compliant in Israel. The trustee is perfectly able to sell for a non-resident, withhold Israeli tax on the Israeli-source portion, and remit the balance abroad. Ask the trustee for a written computation of the sourcing split before the sale, not after.
Country-Specific Notes
| Destination | Key issue |
|---|---|
| United States | US citizens are taxed regardless of residence; sourcing drives the foreign tax credit basket. Watch state tax, which ignores the treaty. |
| United Kingdom | UK taxes equity on a workday-apportioned basis too, but the periods it uses can differ; statutory residence test split-year treatment matters. |
| Germany | Broadly aligned workday approach; documentation standards are high and certificates are requested routinely. |
| Canada | Departure tax on the Canadian side may collide with Israeli exit tax if you later move again. |
Your Relocation Checklist
- Fix your residency-cessation date and gather evidence for it.
- Export a workday log per grant, per vesting tranche, before you lose access to company systems.
- Obtain the grant notices, trustee statements, and plan documents in writing.
- Decide on the Section 100A deferral election and file the departure notification.
- Leave the shares with the trustee unless there is a compelling reason not to.
- Request a treaty residency certificate in the new country for each relevant year.
- Coordinate both returns so the sourcing split is identical on each side.
Moving in the other direction? The reverse analysis, and the ten-year exemption, are covered in our Aliyah exemption guide.
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