RSU in US company

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Solar22

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Hi,

I work for an US company in Dublin and have RSU of the company vesting in a couple of months. When selling the US shares after vesting, what taxes are due in Ireland? Would it be better to use a tax advisor to handle this?

Would appreciate your suggestions.
 
I'll assume that the RSU is a "free" grant and not an option that you pay a discounted price for to exercise?

That being the case then the full market value at the time of vesting is liable for income tax/PRSI/USC. If you sell at vest then that's your full liability. If you hold and sell later then any gain is assessable for CGT (Capital Gains Tax) and any loss can (generally) be offset against other capital gains.

If it's a stock option that you pay a discounted price for then the difference between the option price and the market price at vesting time is assessable for income tax etc. and the same CGT approach applies if you don't sell at vesting time.

Are you sure that this isn't taken care of by the broker that your company uses for their employee stock incentive scheme? Up to last year I was a member of such a scheme run by a US company with a presence in Ireland and they used E*Trade who dealt with such tax issues (not CGT though which is a self assessed tax) at their end, remitted the deductions to the Irish authorities and credited the employee's account with the net proceeds with the company reflecting the nominal income and deductions via payroll.
 
To add to this if you have 1000 shares vesting and pay tax/prsi/usc (40+4+8=52%) at the marginal rate you will receive 480 shares post taxation.

Obviously USC varies so, work out your marginal tax rate and apply it to number of shares or value.
 
Paul O Mahoney said:
To add to this if you have 1000 shares vesting and pay tax/prsi/usc (40+4+8=52%) at the marginal rate you will receive 480 shares post taxation.
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Only if you sell shares to cover (the tax and deductions) and hold onto the rest.
There's usually also the option of keeping all shares and covering any tax/deductions using cash.
Or, as in my example, selling all on vesting.
I always preferred the latter myself because it never made sense to me to put all my eggs in one basket - collecting a salary from my employer's company and investing in shares in the same company - as that was concentrating risk in one place.
But each individual's needs and preferences may vary.

Just to summarise, there are two likely tax issues here.
  1. Income tax (and PRSI/USC) on the difference between the market price at vesting and whatever you pay for an option or RSU (possibly zero).
  2. CGT on any gain should you hold the shares and sell later at a gain (with losses treated as normal under CGT rules).
You should check with your employer and their broker to see if they deal with #1 "at source" and via payroll. #2, should it arise, will be your own responsibility as CGT is a self assessed tax. I don't think that you need a tax advisor for any of this. Most employers offering such employee incentive schemes normally offer guidance (not actual advice) on the tax issues. There is also information on the Revenue website.
 
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Thank you for your replies! It is indeed a RSU grant, not an equity purchase scheme. The RSU (and the shares once vested) are held by a broker in the US. They informed me that the number of shares will be reduced at vesting to pay some tax liability. I will query if this covers US and Irish (income tax/PRSI/USC) tax liability. I thought it may be some US tax only since this reduction happens at vesting and before deciding to sell or keep the shares.
 
Unless you are US citizen or resident, there is no US tax involved here.
The reduction of shares is due the company selling enough of them to cover the tax/PRSI/USC portion.
i guess you could provide cash to pay for the tax part it in order to keep all the shares, if your employer facilitates. Which might not be the case.
 
Now that you are in the mood make sure your W-ben8 certificate is up to date, if you hang onto the shares and the company pays dividends the US withholding tax will be 15% rather than 30% .
 
newirishman said:
Unless you are US citizen or resident, there is no US tax involved here.
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That's only true if a non US resident has completed and lodged a W-8BEN form via the broker. If that is not done then US withholding taxes will be deducted.

W-8BEN: When to Use It and Other Types of W-8 Tax Forms

Learn about W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY, which show that an individual or business receiving income in the U.S. is a foreign entity.
www.investopedia.com

Edit: apologies, only see references to W-8BEN in other replies above now.
 
Solar22 said:
They informed me that the number of shares will be reduced at vesting to pay some tax liability.
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Normally there are three options
  1. Sell to cover (what you're referring to here) and hold onto the remaining shares
  2. Sell all and receive the proceeds net of any deductions
  3. Use cash to pay any tax etc. liabilities and hold onto all shares
Your company and/or the broker should really be doing a better job of explaining all of these options and any tax issues to employees.
 
Usually payroll sells on behalf of you few vested shares to cover 52℅ tax. If your marginal tax rate is under 52℅ a refund will be made by next payslip after the disposal.
 
Iri2903 said:
Usually payroll sells on behalf of you few vested shares to cover 52℅ tax. If your marginal tax rate is under 52℅ a refund will be made by next payslip after the disposal.
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Not in my experience.
In my experience with several companies and several US based brokers the three options in my previous post were always available and I always got a notification to choose the preferred option in advance of any vests.
 
ClubMan said:
Normally there are three options
  1. Sell to cover (what you're referring to here) and hold onto the remaining shares
  2. Sell all and receive the proceeds net of any deductions
  3. Use cash to pay any tax etc. liabilities and hold onto all shares
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Option 2. is what I plan to do. The broker is telling me the shares need to vest first before I can request to sell. When the shares vest a breakdown of the deductions will be provided. Will also query with my employer on these deductions.

My non US resident W-8BEN form should be up to date.
 
They seem to be implying that there may be a delay between the vesting and the sale? That's also not my experience and E*Trade/UBS/Merrill Lynch and other brokers were always able to offer the option of "sell all [immediately - subject to market activity] on vest" and then remit the net proceeds to the account (or even automic transfer to Ireland*). Admittedly the trade and remittance of proceeds could sometimes take a few days to settle/clear.

* Depending on the amounts involved it may be more cost effective to use a service such as CurrencyFair to repatriate the funds back to Ireland in €. There are other threads on the most cost effective ways to transfer money to/from Ireland to other currencies and countries.
 
Iri2903 said:
Usually payroll sells on behalf of you few vested shares to cover 52℅ tax. If your marginal tax rate is under 52℅ a refund will be made by next payslip after the disposal.
Click to expand...
I don't think payroll does the transaction it simply records the transaction that the broker does on vesting.
This is the most efficient way for the employee and Revenue to collect the taxes due.
 
Would it not be better to calculate it yourself to ensure that you understand it and get an idea of the amounts?
 
These sorts of questions come up from time to time.

A Key Post on the topic would be very helpful.

It does not have to be perfect and 100% correct. If you are later corrected, you can edit the original post.

Examples would be critical.

Or maybe it exists already on some other forum?

Brendan
 

This amount withheld at vesting will cover all Irish tax liabilities due at that point (IT/PRSI etc). The shares will be subject to CGT in Ireland which will vary based on how long you hold them for. If you sell the shares on vesting day there should be 0 CGT, if you wait a year and the share price goes up by $100 that increase is subject to CGT net of personal exemption.

One annoyance is to calculate CGT you need to convert the shares to Euro using the rate at time of acquisition and at the rate at time of sale to calculate the P/L. You can't just take the difference in dollar and convert to Euro.

Another complexity is if you build shares up over multiple vesting periods you have to calculate the tax based on FIFO.
 
I work for a US company as well. I don't think you need to get a tax advisor as it's normally quite simple. I have RSU as well (mine with Merrill Lynch) vesting every year in December. The company is obliged to withhold the 52% tax so I don't have to do. What you get allocated on the vesting day is already taxed, then you can sell them. So I'm sure it's the same case for you since U.S. multinationals are normally compliant as far as taxation is concerned. I provide them the W8-BEN form every 3 years. I sell my shares a day or two past the vesting date and they are deposited in the brokerage account after a day or so, then I go to the withdraw section, select transfer, put my AIB IBAN select withdraw and they appear in my AIB account after a few days that's it. If I sell the shares long past the vesting date I may have a potential capital gain between the selling price and the vesting price if the share price increases, but because I sell them very close to the vesting date and because my amounts aren't huge (around 3000 €/year) , I never have a capital gain. I have been at this for the last 7 years at least, and never had any questions or enquiries from Revenue or anyone else so far

Francois
 
Very similar to what happens in my case. My employer triggers a "sell to cover" operation when the RSUs vest, via the brokerage firm.

They sell 52% of the shares & I receive the remainder. I also have the pleasure of paying the brokerage fees for this transaction!

In the following month's salary slip, the monetary value of the shares is included, alongside my salary & taxed in the same way as any other income. There's a tax credit listed for the amount raised from the sell to cover operation.
 
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