What are RSUs and how are they taxed in Ireland?
Summary
RSUs, or Restricted Stock Units, are a form of share based compensation. They are usually taxed via a sell to cover scheme upon vest.
Under an RSU scheme, you are granted the right to receive company shares at a future date. The 'grant date' is the date on which the right to receive these shares is received. This is usually the employee's start date in the company or shortly after a performance review. There are no tax implications at the grant date.
The shares then proceed to vest over a fixed period of time, i.e., vest dates. This is when you actually own the shares. This typically happens on a quarterly basis. When your RSUs vest, they are considered taxable income. You will pay Income Tax (40%), Universal Social Charge (USC) (8%), and Pay Related Social Insurance (PRSI) (4%) on the market value of the shares at the vesting date. Companies usually operate a 'sell-to-cover' scheme to pay the tax due on the vesting to Revenue. This essentially means that 52% (i.e., the highest tax rate) of the shares are automatically sold when they vest and the sale proceeds are used to fund the taxes. This usually happens automatically in the background and does not require any action from you if you have opted into the sell to cover scheme. If you do not end up paying any tax at the highest rate (52%), the overpayment of tax will be refunded to you via your tax return. To file your tax return, click here.
If you subsequently sell the shares after they vest, you may be liable for Capital Gains Tax (CGT) on any profit made. The profit is the difference between the share price at the vest date and the share price at the sale date. The current CGT rate in Ireland is 33%.
Your tax residency status in Ireland at the time of vesting determines your tax liability. If you're not a tax resident on the vest date then there is no Irish tax due. Split-year Treatment (SYT) applies to RSU income. For more information on SYT, click here. If you are eligible for SYT, any share vests prior to your arrival in the Ireland or post departure are not subject to Irish tax.
This information is for general knowledge and guidance only and does not constitute professional tax advice.
Do I get a refund of taxes if I leave Ireland during the year?
You are likely eligible for a refund of taxes if you leave Ireland during the tax year.
How to Determine if you are tax resident in Ireland
Your tax residence status in Ireland is determined by the number of days you are present in Ireland during the tax year.