Tax on RSUs in retirement year

S

stevemcgarrett

Registered User
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11
Hi,

I have a quantity of RSUs granted by my American employer in recent years. As they have vested, a portion have been withheld to pay Irish tax, USC etc. I will be retiriing early next year, and when I exit the company, the balance of the RSUs will vest. I will be taking a tax-free lump sum on retirement, and as such I assume I will have little or no taxable income in 2026. Given that, would I be able to receive the RSUs free of Irish tax (or at most pay tax at the standard rate)?

Thanks for your help...

Steve McGarret
 
stevemcgarrett said:
Given that, would I be able to receive the RSUs free of Irish tax (or at most pay tax at the standard rate)?
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Depends on the amount of the gain involved and what amount of your tax credits and standard rate band are left when they vest. Difficult to comment more specifically without more detailed information. Assuming that the RSUs are basically free shares then the full market value at the time is effectively income and treated as such from a tax/USC/PRSI point of view.
 
Thanks ClubMan. Wasn't expecting specific values, just confirmation that I'm thinking on the right lines. They're effectively free shares and worth ~$46k at today's prices. It looks like there will be a smaller liability than if it was on top of a full year's income. I'm assuming that I will otherwise have a very small taxable income for the reasons I mentioned.
 
The company I worked for sold about 50% of the RSUs on vesting so to satisfy PAYE guidelines. My understanding is when I sell them they are liable for CGT of 33% of any gain the share price took from that point. Is this not what should happen here or did they just set aside shares for them to cash in later ?
 
Yes, the tax/PRSI/USC on the RSUs is normally dealt with via payroll these days. But the question seemed to be what tax would be due. In this case if they retire early in the year, have little earned income, and haven't used up all of their income tax credits and/or standard rate tax band then the tax due may not be 40%. It may be 0%, 20%, 40% or some combination of those rates. But payroll should deal with that as you point out.
 
elcato said:
The company I worked for sold about 50% of the RSUs on vesting so to satisfy PAYE guidelines. My understanding is when I sell them they are liable for CGT of 33% of any gain the share price took from that point. Is this not what should happen here or did they just set aside shares for them to cash in later ?
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Sounds possibly like these were "share-settled" and you now hold shares, no longer RSUs (?). Have a read of the Revenue guidance on RSUs.
It is possible that you still have RSUs but the employer determined that the tax liability arose on vesting, not cash-out. This is a subtle difference depending on how the guidance is read when RSUs vest but the employee can defer the cash-out.

There is different treatment if they are "cash settled" or "share settled".

Your position could differ from that of the OP.

Restricted Stock Units (RSUs)

The page outlines the taxation of Restricted Stock Units (RSUs)
www.revenue.ie www.revenue.ie
 
Thanks for all the replies. Typically ~50% of my vesting shares have been withheld to cover tax/USC/PRSI. My remaining RSUs will vest on my leaving date, and as pointed out, the tax rate will depend on my taxable income and credits up to that point. I'm hoping that payroll or the stockbroker don't just assume that my taxable income will be as in 2025 and withhold the usual amount. Sounds like I need to raise with with my employer.
Happy New Year all.
 
stevemcgarrett said:
I'm hoping that payroll or the stockbroker don't just assume that my taxable income will be as in 2025 and withhold the usual amount.
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So the issue is that payroll usually deals with the tax/PRSI/USC but you're worried that they'll assume that you're liable for 40% tax as before when you may be liable for less (e.g. some combination of 40%/20%/0%) due to lower earnings for 2026? Is there an option to not sell to cover (tax etc.) and settle any tax/PRSI/USC liabilities yourself?
 
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ClubMan said:
So the issue is that payroll usually deals with the tax/PRSI/USC but you're worried that they'll assume that you're liable for 40% tax as before when you may be liable for less (e.g. some combination of 40%/20%/0%) due to lower earnings for 2026?
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Yes, that's the concern.
Is there an option to not sell to cover (tax etc.) and settle any tax/PRSI/USC liabilities yourself?
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I'll have get to get on to payroll/stockbroker for that as I suspect their default will be to withhold the shares.
 
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