Just a quick question around RSUs and taxation, maybe others have experience here.
A typical thing for some companies is to compensate employees with RSUs that vest after a certain time, typically US companies do this and is my situation now.
A lot of my RSUs vested last year and they are reported as income on the salary certificate, however i never sold them and paid taxes on the vesting price. Now they have significantly decreased in value and can't help feel like I have been totally screwed. Is it possible to claim a loss and get a tax dedcution on RSUs after they are sold in Switzerland?
It is interesting, in some other countries, they withhold the amount of shares to cover the tax at the time of vesting, but here not at all
That ́s an unfortunate disadvantage of RSUs. In Switzerland, you are taxed on income at the moment it becomes available to you. When RSUs vest, you can trade them freely => it is the taxable moment (on the basis of the share price upon vesting). Keep in mind that you received these for "free"
Had you paid for them, only the difference in the value would have been taxable. This is typically not the case with RSUs ... more with RS sold to you at a discount.
Losses on RSUs between the time of vesting and actual sale are not relevant from tax perspective.
Switzerland does not apply capital gains tax to non professional investors; you have now the option to hold as long as you want and there will be no further tax on any gain (or loss).
Some CH companies give a choice between stock awards in RS or RSU. The first would be taxable upon grant (usually with a discount on the taxable value; the discount depends on the length of the vesting period), the second is taxable at the time of vesting (no discount). If the share price drops a lot between grant and vesting, RSU is better from tax perspective ... and vice versa
Yes this is exactly as I thought. The reality is its not a "total loss" since I did receive these "free" in some sense, but I guess it is just painful to swallow since I could have earned more money if sold earlier
I think the best piece of advice here is just to sell RSUs when they vest, and then reinvest and diversify. At least this gives peace of mind
I just wonder why they are not treated as income until you sell them?
If it is a US company, it trades in the US, right? The US broker is obliged to withheld Swiss taxes. Either they sold to cover or your company somehow paid it upfront, or you provided the money directly. I advise you to download and study your brokerage statement. The fact that you didn't sell anything doesn't mean that something wasn't sold upon vesting to cover taxes. Anyway, you have to attach the statement to your tax return.
Because the moment they share you effectively receive an income that is equal to their market value and you are free to do with them what you want. You are saying "Some RSUs vested, I did not sell them - now they dropped in value" but another way to look at what happened, in practice, is: "You received a cash bonus from your company (taxable event for the bonus sum), you decided to buy some shares of your company with these money (including the part that you will owe as taxes) - now they dropped in value".
Yes, not selling a vested share is exactly as deciding to buy it. If you were not planning on buying your company's stock - sell the shares and do with the cash what you would've done with a cash bonus
If you don't want the exposure, then you sell when the shares vest, however if that's your issue, then just ask for cash instead - it's the same thing.
If you can't sell, then you probably shouldn't sell. People in positions that can't sell, are supposedly senior so if you need cash better to work out another solution with your employer than sell stakes in the company you hold a senior position in.
Generally speaking if you don't want the risk, or you don't believe the company will be worth significantly more in the future, just renegotiate and get cash. If it's a big company where you're a cog in thousands, RSUs is probably standard operating procedure, so then sell and nobody will bat an eye.
Obviously the discussion would not be had if the value shot up and you got all the gain tax-free
Even non-senior people have many periods when they cannot sell the vested RSU immediately. The more senior longer the periods. Theoretically you can end up even in minus (more tax paid than the value when sold) but usually not the case. Not having capital gains tax is already a huge plus imo. With the volatility of recent years and what may come risks are high indeed.
USA has more options actually, like different taxation if you are prepaid to automatic selling but even that can ve financially worse off, especially given that your stock is soldat the same time as others'.
As other have said the tax event is during vesting. If you are working for a US based company that is stock listed and you are in Switzerland (HQ or otherwise) chances are it is a question of time before the stock goes up.
As you noted this was "free" stock with only the taxes due and in the long term horizon when you sell you should be net positive. 2022 was a tough year for the markets so don't lose that perspective
Agree with Kri - if this was some withholding by eTrade, you should be able to claim it against your actual taxes due.
The 7% rate is rather odd and I have no idea how eTrade arrived at that rate. They should be able to provide more clarity.
In general, it is normal that some tax is withheld by the broker at time of taxable event, i.e., vesting in the case of RSU. It is also the case that the share price and exchange rate are calculated at the moment of vesting for tax purposes. Sometimes you win, sometimes you lose in these cases.