RSUs taxed at vest — plan liquidity
Canadian RSUs are treated as employment income at vest, so engineers should account for tax on the vest date and consider selling at vest to cut single‑stock concentration — U.S. withholding on foreign shares can be claimed as a credit. — the latest briefings reiterate ordinary income taxation at vest and the practical move to diversify immediately. ( )
Most employers use a “sell‑to‑cover” or net‑settlement at vest to remit payroll withholdings, and plan documents or payroll teams commonly sell just enough shares to cover required taxes, CPP and EI remittances. (ctf.ca) Automatic withholding frequently understates final tax owed because withholding practices are calibrated to payroll rules rather than an employee’s marginal rate, creating potential shortfalls at tax‑filing time. (nicolawealth.com) Any gain between the fair market value used for the income inclusion and a later sale is treated as a capital gain with a 50% inclusion rate under Canadian rules, making adjusted cost base tracking essential for calculating future tax. (resourcehub.bakermckenzie.com) The CRA has signalled that certain RSU structures can trigger salary‑deferral‑arrangement treatment or a “hybrid” sourcing approach that allocates in‑the‑money value to grant years, which can shift timing or jurisdiction of taxation for cross‑border assignments. (taxathand.com) When U.S. source tax is withheld (for example on U.S. dividends or allocated U.S. employment-source RSU income), Canadians generally claim a federal foreign tax credit using T2209 (and a provincial/territorial credit via Form 428 where applicable) to avoid double taxation. (canada.ca) The Canada–U.S. treaty reduces U.S. dividend withholding to 15% for qualified Canadian residents and U.S. treaty benefits are claimed via Form W‑8BEN with brokers; U.S. dividend withholding is also generally exempt when U.S. equities are held inside an RRSP because of the treaty. (irs.gov)
