Tax on Shares in a US Company

[pepperds]

Hi,

an interesting query which I cannot seem to find a relating thread on.

I work for a company in Dublin and received a couple of years ago Shares in the parent company which is based in the US and quoted on the NYSE. The shares were to be made available in 3 parts, once a year, and this month I have received the following letter, which is obviously a standard US letter, I'm curious to find out whether the action taken is the correct one for a non-US resident. (I have replaced the company name with the word COMPANY)

"On February 1, 2007, the restrictions were lifted on 334 shares that were previously granted to you. As a result of this vesting, the value of such shares became taxable to you on that day. Based upon the price of $13.255 (the average of the high and low price on trading day immediately prior to vesting), COMPANY calculated the appropriate amount of tax withholding payable to you as a result of the vesting of your 334 shares. COMPANY then withheld from you 137 shares of Class B Common Stack, the necessary number of shares (rounded up to the nearest whole share) to pay the withholding taxes, and the remaining 197 vested shares were deposited into your brokerage account at BROKER.
This statement indicates below the gross taxable amount and all of the taxes that were withheld from you as required (via COMPANY's withholding of 137 shares). These tax-withholding amounts are already included in your YTD totals. The net amount represents your total cost basis in your remaining 197 shares (your per share cost basis is $13.255) and you will need this amount for your tax return for the year in which you sell all or a portion of your remaining shares of stock. Any sale by you of any or all of these remaining shares will result in a capital gain or capital loss depending upon the sales price.
Please retain these figures for your records and remember to provide this information to your tax preparer. It is advised that you consult with your tax advisor in order to verify your withholding for the year 2007 will be proper for your own personal situation.

Gross Taxable Amount $4,427.17
Statutory Tax Withholdings
Federal Income Taxes $1,815.14
Social Security Taxes
Medicare Taxes
Worked State Taxes
Lived State
Local Lived
SUI
SDI
NET AMOUNT"

My principle question is that it would seem that shares have been taken from me to pay tax, however this is in the US. Shouldnt I have access to the full amount of shares and then obviously if I choose to sell I would put this in my Tax Return and pay CGT.

Any help would be greatly appreciated

regards,
pepperds

 

[ClubMan]

You should probably have filled in a W-8BEN form to avoid some or all US witholding taxes so that you would then just be liable for Irish taxes on the shares. Too late now I presume? But you may get a credit against Irish liabilities in respect of any US taxes witheld.

Don't forget that options exercised at a discount to market price on the day are subject to income tax and any subsequent disposal gain (with respect to the market price at the time of exercise) is assessable for CGT. See here for example:

Tax Situation for shares purchased through ESPP Scheme & annual Bonus as shares

 

[pepperds]

Thanks Clubman

I will enquire regards this form

I must stress that these are not options, they are full shares

regards
pepperds

 

[ClubMan]

OK - but if you received the shares for free then you were liable for income tax on the full value at the time that you acquired them (i.e. on the full market value at that time). In that case they would effectively be options priced at $0 which were exercised automatically or at specific dates. Then any gain with respect to the market price of the share at the time that you acquired them is assessable for CGT. If this scheme is not Revenue approved (in which case different tax treatment and the possibility of deferrals may apply) then it is quite likely that you have outstanding (income) tax liabilities here that need to be sorted out ASAP.