Selling RSUs before coming to Canada or after coming to Canada

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gwtw
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Joined: Sat Aug 31, 2019 12:41 pm

Selling RSUs before coming to Canada or after coming to Canada

Post by gwtw » Sat Aug 31, 2019 1:12 pm

Hi,

I will be moving from California, the US to Canada permanently In Sep 2019. I have some RSUs that were granted to me by my US employer and have vested. There has been a 30% withholding in the US for all of these RSUs but I haven't sold any. I am not sure how taxation will work for these RSUs when I move to Canada. Can someone help me with my questions, please?

Selling stock in the USA:
1. Let's say I have 150K worth of stocks(100K is the cost basis in USA + 50K long term gains). If I sell 150k$ worth of stock while I am in the US, I will be paying 18% federal + 9% California tax on gains (total 13.5k USD) but all the remaining money 136.5K USD can be transferred to Canada without any tax implications. Is this correct?

Selling stock in Canada:
Let's say the total stocks I have is 150k (100K is the cost basis in USA + 50K gains). I do not sell the above 150k$ stock in the USA. When I move to Canada, I sell these in the next tax year (2020). I assume that these stocks grow to 160k in 2020.
1. Since when I entered Canada, stocks were worth 150K and when I sold they were 160k), the gains in Canada are only 10k. So in Canada, I have to pay taxes only on the gain of 10K$ (= almost 2.5K$). Is this correct?
2. In the USA, I don't have to pay any taxes on any gains since I don't have a residency. Is this correct?

Any response is appreciated, thank you :)

jgowastaken
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Joined: Mon Sep 09, 2019 4:11 pm

Re: Selling RSUs before coming to Canada or after coming to Canada

Post by jgowastaken » Mon Sep 09, 2019 4:26 pm

I am seeking advice in a similar situation myself but am thinking I might have gathered some understanding of it through reading online. I moved to Canada in June, and am about to close a transaction of private stock for ~$400k USD. My understanding is the price of the stock on the day you move to Canada minus the sale price = your tax liability to Canada. However I believe you would still owe the US for difference between strike price and price the day you move. For example:

Strike price: $10/share
Price on day you moved to Canada: $17/share
Price on date you sell: $20/share
=
$7/share tax liability to US, $3/share tax liability to Canada. Obviously both have different rules for how they tax this profit, but that is my understanding. I do not believe it's an all or nothing thing as you lay out in your scenarios, but I could be wrong.

Also residency may play into this if you do it all within the year you move, however that I haven't figured out yet and is a big reason I plan to pay a professional for this advice soon - but I'll take any advice anyone out there might have!

nelsona
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Re: Selling RSUs before coming to Canada or after coming to Canada

Post by nelsona » Thu Sep 12, 2019 6:29 pm

Assuming you are not a US citizen of GC holder, your would have NO cap gains liability on shares that you have exercised, but waited to sell after leaving US.
If you are a US taxpayer, you would have full tax liability, but would get credit on the US return for the Cdn tax.


US doesn't "divvy" tax liability.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Re: Selling RSUs before coming to Canada or after coming to Canada

Post by nelsona » Thu Sep 12, 2019 6:31 pm

In either case there would be the Cdn tax on the gains after arrival in Canada.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

gwtw
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Joined: Sat Aug 31, 2019 12:41 pm

Re: Selling RSUs before coming to Canada or after coming to Canada

Post by gwtw » Thu Sep 12, 2019 6:37 pm

Thanks for responding.

I did some research myself, and if I don't have tax residency in US for the year, us taxes it at 30% which is already deducted at the time of allotment.

So let's say, 10$ a share in Jan 2019 when it was alloted to me.
3$ is deducted and I receive 7$

I move to Canada in September 2019. At this time, the share price has grown to 15$. Now I sell this stock in 2020 when I have no tax liability to usa, the price is 20$.

In this case, I will just pay tax on 5$ to Canada.i don't have to pay any USA taxes. The key is to not have tax residency in USA when I am selling this.

gwtw
Posts: 5
Joined: Sat Aug 31, 2019 12:41 pm

Re: Selling RSUs before coming to Canada or after coming to Canada

Post by gwtw » Thu Sep 12, 2019 6:42 pm

Not sure how to edit something - this is what I meant to type but was on the phone earlier.


I did some research myself, and if I don't have tax residency in the US for the year, I don't have to pay taxes on gains.

So let's say, 10$ a share in Jan 2019 when it was alloted to me. 3$ is deducted at the time of vest and I receive 7$ worth of share while I am in USA.

I move to Canada in September 2019. At this time, the share price has grown to 15$. Now I sell this stock in 2020 when I have no tax liability to USA, the price is 20$.

In this case, I will just pay tax on 5$ to Canada.i don't have to pay any USA taxes. The key is to not have tax residency in USA when I am selling this.

[/quote]
I did some research myself, and if I don't have tax residency in US for the year, us taxes it at 30% which is already deducted at the time of allotment.

So let's say, 10$ a share in Jan 2019 when it was alloted to me.
3$ is deducted and I receive 7$

I move to Canada in September 2019. At this time, the share price has grown to 15$. Now I sell this stock in 2020 when I have no tax liability to usa, the price is 20$.

In this case, I will just pay tax on 5$ to Canada.i don't have to pay any USA taxes. The key is to not have tax residency in USA when I am selling this.


[quote=gwtw post_id=55988 time=1568327855 user_id=10695]
Thanks for responding.

I did some research myself, and if I don't have tax residency in US for the year, us taxes it at 30% which is already deducted at the time of allotment.

So let's say, 10$ a share in Jan 2019 when it was alloted to me.
3$ is deducted and I receive 7$

I move to Canada in September 2019. At this time, the share price has grown to 15$. Now I sell this stock in 2020 when I have no tax liability to usa, the price is 20$.

In this case, I will just pay tax on 5$ to Canada.i don't have to pay any USA taxes. The key is to not have tax residency in USA when I am selling this.
[/quote]
I did some research myself, and if I don't have tax residency in US for the year, us taxes it at 30% which is already deducted at the time of allotment.

So let's say, 10$ a share in Jan 2019 when it was alloted to me.
3$ is deducted and I receive 7$

I move to Canada in September 2019. At this time, the share price has grown to 15$. Now I sell this stock in 2020 when I have no tax liability to usa, the price is 20$.

In this case, I will just pay tax on 5$ to Canada.i don't have to pay any USA taxes. The key is to not have tax residency in USA when I am selling this.

nelsona
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Re: Selling RSUs before coming to Canada or after coming to Canada

Post by nelsona » Thu Sep 12, 2019 8:43 pm

Hard to read what you said (don't bother with quotes, etc, they don't help) , but remember that your exercise, while it may have been withheld at 30%, is merely the withholding. You still have to report the full $10 amount as income on your 2019 IRS return, and pay whatever tax is owed. What was withheld is added to your other tax payments for the year, such as what was withheld on your pay slip. You will get a slip from the broker/firm at year end (so make sure they know where you are)
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Re: Selling RSUs before coming to Canada or after coming to Canada

Post by nelsona » Thu Sep 12, 2019 8:46 pm

Don't confuse the tax that was withheld when you vested (as a US resident) , with the 30% that might have been withheld had you been non-resident of US. They are not the same.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

gwtw
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Joined: Sat Aug 31, 2019 12:41 pm

Re: Selling RSUs before coming to Canada or after coming to Canada

Post by gwtw » Thu Sep 12, 2019 10:04 pm

Hard to read what you said (don't bother with quotes, etc, they don't help) , but remember that your exercise, while it may have been withheld at 30%, is merely the withholding. You still have to report the full $10 amount as income on your 2019 IRS return, and pay whatever tax is owed. What was withheld is added to your other tax payments for the year, such as what was withheld on your pay slip. You will get a slip from the broker/firm at year end (so make sure they know where you are)
- completely agree with reporting 10$ to the US taxes in 2019, and depending on my income bracket and state taxes, i might need to pay more. I don't need to report this to Canada in 2019 though.


Don't confuse the tax that was withheld when you vested (as a US resident) , with the 30% that might have been withheld had you been non-resident of US. They are not the same. - yes, when I vest more stocks in 2020, they will be withheld at 30% in US, but depending on the tax treaties between US/Canada, I might need to pay more taxes in Canada.


also, i give up on quotes :sigh:

nelsona
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Re: Selling RSUs before coming to Canada or after coming to Canada

Post by nelsona » Fri Sep 13, 2019 9:29 am

What did I tell you about quotes. You did it anyway. Too confusing to read now.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

gwtw
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Joined: Sat Aug 31, 2019 12:41 pm

Re: Selling RSUs before coming to Canada or after coming to Canada

Post by gwtw » Fri Sep 13, 2019 9:43 am

Umm. There are no quotes now. I just copy pasted your statement

nelsona
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Re: Selling RSUs before coming to Canada or after coming to Canada

Post by nelsona » Sat Sep 14, 2019 1:48 pm

That's what I mean. Just post your new info. I know what I wrote.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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