Restricted Stock Units (RSUs) and Tax

If you have received RSUs from your employer you need to be aware of the tax situation in Ireland as not all tax is looked after by your employer via your payroll.

 

What is an RSU?

Restricted stock units are stock units in a company. They are restricted because they will not be transferred to you, the employee, until certain conditions have been met. When they are transferred to you one day they are said to “vest”. Once vested, they are now in your ownership and you will be allowed to retain or sell them on. A typical example of a condition is that you have stayed with the company for a certain number of years. 

 

Do I pay income tax on RSUs?

Yes. However, executives who receive RSUs usually do not run into income tax problems with shares that are acquired under RSU, since the employer is obliged to deduct PAYE/PRSI/USC at the point that the executive acquires the shares. So, in the vast majority of cases income tax has already been paid. 

 

What about when I sell?

If you ever decide to sell on your RSUs, you will be liable to a different tax, Capital Gains Tax (CGT). CGT needs to be paid on the difference between the net proceeds you receive, and the value of the shares at the date of vesting. The current rate of CGT is 33%. 

For example, let’s say 100 shares were vested at a price of €150 per share and Income Tax, PRSI and USC were deducted accordingly. If all 100 shares were then sold at a later date for €200 per share your total gain would be €5,000.

The first €1,270 of gains made by any individual in a tax year are exempt from Capital Gains Tax so the taxable capital gain is €3,730 i.e. €5,000 - €1,270.

The current Capital Gains Tax Rate is 33% so your tax bill would be €1,230.90

 

When is the CGT due?

If the shares are sold on or before 30 November CGT is due by 15 December in the same tax year. If the shares are sold during the month of December the payment date is 31 January in the following year.
 
Details of the calculation of the Capital Gain must also be included on the income Tax Return of the employee for the tax year that the gain was made.

 
We can help
 

At TaxAssist we work with lots of employees who have received RSUs. We will make sure you pay the correct tax whilst ensuring all reliefs are claimed. If you would like us to handle the tax on your RSUs get in touch for a free consultation today.

 

Date published 29 Mar 2022 | Last updated 2 May 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.