The Israel Tax Authority (ITA) recently published Income Tax Circular No. 1/2021 of 27 January 2021 concerning the ITA's position on the treatment of payments made by an Israeli subsidiary to its foreign parent under a recharge agreement for stock-based compensation (capital instruments) provided to the subsidiary's employees. Under such agreements, the parent company (the allocating company) charges the subsidiary (the employer company) a fee for the stock allocated to the employee. The Circular has been issued in relation to the 2018 Supreme Court decision in the Kontera case. In that decision, the Court stipulated that stock-based compensation must be...