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Summary of Tax Treatment of RSUs

Summary of Tax Treatment RSUs. Gallagher Keane Chartered Accountants
Tax

Summary of Tax Treatment of RSUs

Restricted Stock Units

We are seeing more and more employees getting offered RSUs as part of their Salary Package and many are unsure of the tax consequences. In the majority of cases there will be both an Income Tax liability and a CGT liability.

What is an RSU?

A Restricted Stock Unit (RSU) is a grant (or promise) to an employee/director to the effect that, on completion of a ‘vesting period’, he/she will receive a number of shares or cash to the value of such shares. In this way, no shares or cash will pass to the employee/director until the vesting period has passed.

An RSU is, generally, evidenced by way of a certificate of such entitlement.

The ‘vesting period’ is the period of time between the date of grant (or promise) of the shares (or of the cash value of such shares), and the date on which the vesting condition is satisfied. Vesting periods are usually satisfied by passage of time (i.e. end of a stated period of time from the award date), by the individual’s performance, or by the achievement of corporate goals.

Tax Treatment

  1. An RSU is a taxable emolument of the employment chargeable to income tax.
  2. RSUs chargeable to Income Tax under Schedule E are within the scope of the PAYE system. USC and PRSI are also chargeable on RSUs.
  3. The income tax charge on the shares (or the cash amount of such shares) arises either:
    • On the date of vesting (rather than grant date) of the RSU; or
    • Where the shares or cash pass to the employee/director on a date prior to the date of vesting, on that prior date.

When and Where Are They Taxable?

  1. Where the RSU is share settled (i.e. shares are issued to the employee/director), an employee may need to sell their shares to fund the tax, USC and PRSI due. Revenue is prepared to delay collection of tax, USC and PRSI until the date on which the shares are actually settled, provided that the settlement date is within 60 days of the vesting date.
  2. In relation to the taxation of RSUs, the full market value of the shares, (or the cash amount of such shares), is liable to PAYE, USC and PRSI. Employer’s PRSI will not apply to share settled RSUs.
  3. RSUs are fully taxable in the State if they vest at a time when the holder is an Irish tax resident. If the RSUs vest and the holder is no longer an Irish resident, the RSUs are not taxable in Ireland regardless that the holder may have been resident in Ireland at the time of the grant and during the vesting period.
  4. The full market value of the shares (or the cash amount of such shares), is liable to PAYE, USC and PRSI. Employer’s PRSI will not apply to share settled RSUs.

Summary of Tax Treatment of RSUs

Date of Grant

Tax at GrantNo
Responsibility for Collecting TaxN/A
Employee ReportingNo
Employer ReportingNo

Date of Vesting

Tax at VestYes: PAYE, USC & Employer PRSI.
Responsibility for Payment of TaxEmployer: PAYE withholding at date of vesting*.
Employee ReportingNo
Employer Reporting Yes: PAYE Reporting

Disposal of Shares

Tax at Sale Yes: Charge to capital gains tax (CGT), on any gains realised*.
Responsibility for Payment of TaxEmployee.
Employee Reporting Yes. An Employee must file a return by 31 October in the year after the date of disposal. A return is required even if no tax is due because of reliefs or losses. An employee must file: a Form CG1 if not usually required to submit annual tax returns; Form 12 if a PAYE worker or a Form 11 if considered a chargeable person for tax purposes.
Employer Reporting No.

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