Taxation on exercising Foreign Restricted Stock Units

After a bit of reading, I'm confused about the taxation of my restricted stock units.

I work for a US-based company and tax resident in Ireland.

My company has provided me with Cash Settled Appreciation & Cash Settled Restricted Stock Units $$.

These are managed via the Fidelity Stock Plan Account.

Some of the stock units have vested this year and I'm looking to sell them.

US Taxation:

I have certified form W-8BEN & considering the double taxation treaty I assume I have to pay 0% US tax on exercising the stock units?

Ireland Taxation:

Coming to more confusing bits -

As I understand from some references,

1. On vesting, you pay PAYE, USC, etc., and if in higher tax rate band ends up to 52%
2. This is paid by submitting the RSTO1 form and paying the money
3. Also, pay the CGT on gains made (33%) subject to the tax-free allowance of eur 1270 annually

In some other references, the employer is expected to withhold the tax as part of payroll as follows,

1. On vesting, half of the shares are sold to pay for PAYE, USC, etc, as part of payroll and it is the employer's responsibility
2. Pay the CGT on gains made (33%) subject to the tax-free allowance of eur 1270 annually

My shares were vested in Feb, and my employer hasn't made any deductions neither I have notified revenue via RSTO1.

When I try to exercise the shares, Fidelity is showing an estimated withholding tax of 52%. If I'm expected to pay the taxes then why it's showing the withholding tax (says based on employer details).

Any clarity is appreciated.

Private said:

My company has provided me with Cash Settled Appreciation & Cash Settled Restricted Stock Units $$.

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Can you explain what exactly this means?

Private said:

I have certified form W-8BEN & considering the double taxation treaty I assume I have to pay 0% US tax on exercising the stock units?

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That's my experience in the past.

Private said:

1. On vesting, you pay PAYE, USC, etc., and if in higher tax rate band ends up to 52%

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Yes - on the discount involved - or the full amount if they're "free" to you.

Private said:

1. This is paid by submitting the RSTO1 form and paying the money

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Sorry - can't answer this specific point as it's been a while for me.

Private said:

1. Also, pay the CGT on gains made (33%) subject to the tax-free allowance of eur 1270 annually

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Yes - once you have acquired the shares (e.g. by them vesting or, say, when purchased at a discount through an Employee Share Purchase Programme) any gain thereafter is assessable for CGT. Be aware of relevant pay/file dates for CGT:

Private said:

In some other references, the employer is expected to withhold the tax as part of payroll as follows,

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I'm not sure if/when an employer is obliged to do this - I've been subject to both approaches - having to manually do the RTSO1 form/payment years ago and having the income tax etc. dealt with through payroll in more recent years. (CGT is always your own responsibility).

Private said:

1. On vesting, half of the shares are sold to pay for PAYE, USC, etc, as part of payroll and it is the employer's responsibility

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Again some employers (or usually their appointed brokers) offer this option.

Private said:

1. Pay the CGT on gains made (33%) subject to the tax-free allowance of eur 1270 annually

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As above - CGT is a self-assessed tax so always your own responsibility.

Private said:

My shares were vested in Feb, and my employer hasn't made any deductions neither I have notified revenue via RSTO1.

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You might want to read this so:

Private said:

When I try to exercise the shares, Fidelity is showing an estimated withholding tax of 52%. If I'm expected to pay the taxes then why it's showing the withholding tax (says based on employer details).

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Some brokers offer different options - sell to cover (taxes), sell all (and remit the net amount after taxes to the account holder), or require the account holder to transfer cash to cover taxes. You probably need to check with your employer and/or Fidelity what options are available to you.

ClubMan said:

Can you explain what exactly this means?

That's my experience in the past.

Yes - on the discount involved - or the full amount if they're "free" to you.

Sorry - can't answer this specific point as it's been a while for me.

Yes - once you have acquired the shares (e.g. by them vesting or, say, when purchased at a discount through an Employee Share Purchase Programme) any gain thereafter is assessable for CGT. Be aware of relevant pay/file dates for CGT:

I'm not sure if/when an employer is obliged to do this - I've been subject to both approaches - having to manually do the RTSO1 form/payment years ago and having the income tax etc. dealt with through payroll in more recent years. (CGT is always your own responsibility).

Again some employers (or usually their appointed brokers) offer this option.

As above - CGT is a self-assessed tax so always your own responsibility.

You might want to read this so:

Some brokers offer different options - sell to cover (taxes), sell all (and remit the net amount after taxes to the account holder), or require the account holder to transfer cash to cover taxes. You probably need to check with your employer and/or Fidelity what options are available to you.

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Thanks for your response - this helps,

There were different things mentioned in revenue doc, broker doc, company doc without clarifying what is the single rule/approach expected to be followed - what I sense from you is there is a myriad of approaches taken so it's best to see what's being applied for me and act based on it

Private said:

what I sense from you is there is a myriad of approaches taken so it's best to see what's being applied for me and act based on it

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I'm just going by my own experience - some of which may be dated with respect to current conventions/requirements. So I'm open to correction on any/all of the above - but I think that the general gist is correct.

The key thing is that (a) discounted/free shares are normally assessable for income tax etc. on any discount relative to market value (the full amount if they're free) at the time of acquisition, and (b) any capital gains thereafter assessable for CGT.

Whether or not the employer/broker deals with the income tax etc. issues may depend on the company but I thought that most or all were required to deal with this these days.

CGT is always your own responsibility.

Your employer should be able to answer some of your questions without giving you specific tax advice which they are most likely precluded from doing.

Private said:

This is paid by submitting the RSTO1 form and paying the money

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To the best of my knowledge the RTSO1 form only applies to share options and does not apply for RSU or TRSU. In my case I receive shares for my foreign RSU/TSRU on vesting net of income tax (employer/broker deducts the tax and they appear as a benefit in kind on my payslip). I only have to pay CGT due once I sell the shares or income tax on any dividends direct to revenue.

Flybytheseat said:

To the best of my knowledge the RTSO1 form only applies to share options and does not apply for RSU or TRSU.

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You're probably correct. My recollection of doing RTSO1 was specifically in relation to options alright.

My RSU is put through payroll. If 2 shares are vested, the employee receives 1 share in the broker account and company withholds 1 share to pay for the tax ( PAYE, USC, PRSI).
In your pay slip, the total of vested RSU value (2 shares)is shown in notional amount as RSU benefit. The value of withhold share (1 share) is in tax deduction as RSU (Tax Withheld). There might be delays in the payroll processing.
You can check your payslip or verify with your payroll department.

If you sell shares on the market and make a gain, you are obliged to file CGT with revenue.

Flybytheseat said:

To the best of my knowledge the RTSO1 form only applies to share options and does not apply for RSU or TRSU. In my case I receive shares for my foreign RSU/TSRU on vesting net of income tax (employer/broker deducts the tax and they appear as a benefit in kind on my payslip). I only have to pay CGT due once I sell the shares or income tax on any dividends direct to revenue.

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Thanks - seems my scheme is cash settled - I also checked with Fidelity - so basically the withholding tax is 52% to pay for PAYE, USC & PRSI which will be taken care of by my employer.

so, the only thing seems to be paying CGT on my side? if so there are two categories of shares I have

[1] Appreciation Unit - stock was given for a grant price - if I sell for profit do I pay CGT only for the gain (sell price - grant price) or entire full price (sell price) because the stock itself is kinda 'free'?

[2] Restricted Unit - stock has grant price of 0 - so I basically gain for whatever rate it sells for - I assume CGT is for the entire sell price in the case here?

wantoknow said:

My RSU is put through payroll. If 2 shares are vested, the employee receives 1 share in the broker account and company withholds 1 share to pay for the tax ( PAYE, USC, PRSI).
In your pay slip, the total of vested RSU value (2 shares)is shown in notional amount as RSU benefit. The value of withhold share (1 share) is in tax deduction as RSU (Tax Withheld). There might be delays in the payroll processing.
You can check your payslip or verify with your payroll department.

If you sell shares on the market and make a gain, you are obliged to file CGT with revenue.

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seems in my case they are not holding it on vesting but rather withholding tax once the shares are exercised

Private said:

Thanks - seems my scheme is cash settled

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This is where these get messy, as there are many forms of share schemes, and you've got 2 different ones.

I might have misunderstood what you've said, but I think:

Private said:

[2] Restricted Unit - stock has grant price of 0 - so I basically gain for whatever rate it sells for - I assume CGT is for the entire sell price in the case here?

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Since 2011 its been mandatory for RSUs to be taxed via payroll on vesting. Employers PRSI is also generally due.

On vesting, you'll pay full income tax, USC, PRSI, etc. based on the market value when they vest minus the price you pay. There's an adjustment for the number of years between granting an vesting.

CGT only comes in on any gain / loss from that market value when you actually sell them. If its cash settled, that means they're sold immediately, so you've no CGT.

Private said:

[1] Appreciation Unit - stock was given for a grant price - if I sell for profit do I pay CGT only for the gain (sell price - grant price) or entire full price (sell price) because the stock itself is kinda 'free'?

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The cash settled appreciation units usually don't give you shares, but should be just a cash payment to you through payroll based on the movement in share price between 2 dates.

From what I understand, you've 2 schemes, and you need to address them individually. Clarify what you have, and don't confuse yourself with other schemes and terminology.

As above, an RTSO1 is only relevant where you have stock options. Some 'appreciation' schemes are structured as options, but I don't think yours is as it's cash settled?

I'd start with your HR / Payroll and clarify what exactly you have, and whether they are addressing tax through payroll for either of them.

I have the same $$$ Restricted Share Units through Merryl Linch (but until a few years back it was through Fidelity). I also work for a U.S. multinational. They are obliged to deduct the RSU tax through payroll. All the taxes are deducted through payroll, so you don't have to worry about. Only if you made a CGT gain above 1270€ between the day when they vest and the day that you sell them you need to pay 33% of tax on that gain. I normally sell them and cash them in the same day (or a few days afterwards at the latest) after they vest so I don't worry about any CGT and as mentioned the income tax etc etc. are dealt with by payroll. We have also the other plan , stock options mentioned by Red Onion but we have so little discount that it's not worth. Some colleague have it and they need to look after the tax themselves nothing is done through payroll for these