RSU Sourcing: How Your Workdays Between Grant and Vest Split the Tax Across Two Countries

RSUs don't belong to the country you live in when they vest. They belong, in shares, to every country you worked in while you were earning them.

Take a grant made while you worked in Bengaluru that vests a year after you started in Amsterdam. Or a grant from your Paris years that vests after a move to Munich. The vest shows up on your new payslip as one number, taxed as if all of it were earned where you now live. Your old country sees it differently, and so, eventually, will your new one.

The Rule: Workdays Between Grant and Vest

The OECD's commentary on the employment article of its Model Tax Convention treats income from employee equity as pay for the work done between the grant and the vest. When that work happened in more than one country, the income is split by workdays: the days you worked in each country during the vesting period, divided by the total.

Most Western European tax authorities follow that approach, and some have written it into law. Switzerland's federal direct tax act (Article 17d) taxes equity income in proportion to the part of the vesting period spent working in Switzerland when you weren't resident there for all of it. Germany's finance ministry applies the same grant-to-vest period in its guidance on employment income under tax treaties. India, for its part, taxes RSUs when the shares are allotted, and keeps a claim on the share earned by work done in India after you have left.

Payroll Will Probably Get It Wrong

Payroll systems are built for one country. Your new employer's payroll will usually withhold on the whole vest as local income. Your old employer's payroll, or your old country's tax office, may not withhold anything, and still expects its share on a return. Assume that in the year you move, nobody's withholding matches the split, and that both countries will only be reconciled on your returns.

Large employers with a mobility team often do run a workday allocation. Many don't, and the ones that do can only use the travel and location data they have. If you spent three weeks of the vesting period working from your old office, or worked remotely from somewhere else, the payroll split won't know unless you told someone.

How the Double Tax Gets Removed, and When It Doesn't

When two countries tax the same vest, the treaty between them decides which one gives way, usually through an exemption or a credit in the country where you now live. The Netherlands and Germany generally exempt foreign-sourced employment income and use it only to set the rate on the rest. Relief of this kind is claimed on a return, against evidence that the other country taxed or was entitled to tax its part.

What goes wrong in practice is timing. India's tax year runs April to March, Europe's mostly January to December. A vest can fall in a year where you were resident in both, in neither, or in one country for tax and the other for payroll. The double tax is usually recoverable. The cash withheld twice is gone until both returns are filed and processed, which can take more than a year.

What to Ask Before the First Vest After a Move

• Does my employer apply a workday allocation to vests after a move, and on what data?
• Which country's payroll is withholding on which part of each tranche?
• Is there a tax equalisation policy, and does it cover equity or only salary?
• Which tax year in each country does each vest fall into?

Ask in writing, before the first vest after the move. Fixing a split before the payroll run is an email. Fixing it afterwards is two returns and a refund claim. The wider set of decisions around a move is in the checklist for moving to Europe.