RSUs in Spain. Worth saying plainly: RSUs are not recognised as such under Spanish law. They are fitted into employment income in kind and, where it applies, into the relief for income generated over several years, but the fit depends on each plan and on where you were resident while the units vested. An article describes the usual road; yours may run elsewhere.
RSUs have a reputation as the simple instrument: you pay nothing, you are given shares, and those shares are worth what they are worth. The complicated part is not the calculation; it is the calendar. And in particular one clause that appears in almost every plan from an unlisted company and that the document calls double-trigger vesting: for the shares to be delivered to you it is not enough for time to pass; a liquidity event also has to happen.
The consequence is that years of work build up without producing income and then land whole in a single tax year. Someone who has vested RSUs for five years and goes through a stock market listing in the sixth does not have five lots of income: they have one, very large, added to that year's salary. This guide is about that effect and, above all, about what can be prepared before it happens.
Why an RSU is not taxed on vesting
An RSU is a promise to deliver shares to you in the future if the agreed conditions are met. While the promise is conditional and you cannot dispose of anything, there is no income. Employment income is allocated when the recipient can demand it, under article 14.1.a) of the Spanish Income Tax Act, and a unit that has vested through service but has not been delivered because the second trigger is missing cannot be demanded.
When delivery arrives, the income is the full value of the shares received. Nothing is subtracted, because you have paid nothing. That is the essential difference from an option, where the income is a difference and not a total value, and we explain it with figures in the three moments of an option and in the comparison options or RSUs.
The two triggers, and how they are worded
| Trigger | What it requires | Where to read it |
|---|---|---|
| Service | Staying with the company according to the schedule | Vesting schedule, in the Grant Notice |
| Liquidity | A stock market listing, a sale of the company or, in some plans, a purchase offer to employees | The definitions of Liquidity Event, Change of Control or Qualifying Event in the plan |
There are three drafting details that matter a great deal and that almost nobody looks at until it is too late.
- The expiry date of the service trigger. Many plans say that vested units expire if the liquidity event does not happen within a set period (seven years is a common figure in these documents). If they expire, there is no income, but there is nothing else either.
- What happens if you leave before the event. In some plans you keep what has vested; in others you lose everything if you are not on the payroll on the day of the event. The economic difference is total.
- The delay between event and delivery. Some plans deliver on the event itself and others on the first settlement date afterwards, which can fall in the next tax year. A gap of a few days can move the income from one year to another.
The hardest scenario is this: the listing happens, the shares are delivered to you and you are taxed on their full value that day; but a lock-up stops you selling them for months. If the share price falls in that interval, you will have been taxed in the general base on a value that no longer exists, and the later loss will go to the savings base, where it does not offset that income. Estimating the tax before the event arrives is not a luxury: it is what allows you to decide in good time.
The build-up, with numbers
A simple example to see the effect. An employee vests 4,000 units a year for five years. In the sixth year the company is sold and the 20,000 shares are delivered, valued at €9 each.
| Scenario | Income per year | Effect |
|---|---|---|
| Annual delivery, if the plan had a single trigger | €36,000 a year for five years | It is spread across five progressive scales |
| Double trigger, delivery in year six | €180,000 in a single tax year | It piles on top of that year's salary and pushes up the average rate |
The total figure is the same; the tax is not. And on top of that comes the cash problem: if the deal is settled in shares and not in cash, money has to be found to pay an income tax bill that nobody has deducted along the way.
The 30 % reduction: what can be argued and what cannot
When income is generated over several years and allocated to just one, article 18.2 of the Spanish Income Tax Act allows the gross income to be reduced by 30 % if the generation period is more than two years. It is the natural tool for this scenario and it should be raised. That said, it comes with three warnings that we always give in writing:
- The generation period has to be supported. The fact that delivery is delayed does not on its own mean the income was generated over years; the argument rests on the service vesting schedule, which is what documents the time worked to earn it. It is a disputed point and it is not settled.
- There is a ceiling. The amount of gross income to which the reduction is applied cannot exceed €300,000 a year. Above that figure, the excess is not reduced.
- There is an anti-repetition rule. The reduction does not apply if, in the five previous tax years, other income with a generation period of more than two years was obtained and the reduction was already applied to it. In plans that deliver in tranches over time, this forces you to choose the year in which to spend it.
We do not promise that the reduction will be accepted. What we do is build the file that supports it (schedule, contract, grant emails) and say clearly what chance we see of it succeeding and what happens if it does not.
What can be done before the event
This is the useful part, because once delivery has happened the room for manoeuvre is minimal. What can be worked on in advance:
- Calculate the impact with your figures. Simulate the delivery on your real taxable base, with your salary and your other income, to know the tax before the obligation to pay it exists.
- Set money aside. If there is no payer in Spain obliged to withhold, you need to have the full amount. And if the company keeps back shares to cover taxes, check which tax system that withholding goes to, because it often goes to the parent company's country.
- Review the year's payments on account. Extraordinary income of this size changes the result of the return. If you are also an autónomo (self-employed), it is worth reviewing the year's instalment payments.
- Put the evidence of the generation period in order. Before the event it is easy; after an information request, it is not.
- Look at residence realistically. If there is a real, planned change of residence for reasons that have nothing to do with tax, it affects how taxing rights are shared under the double tax treaty. What we do not do is design artificial moves: it is a closely watched area and the risk is not worth it.
- Check whether the company is a start-up. If it is one within the meaning of Act 28/2022, article 14.2.m) of the Spanish Income Tax Act allows the timing of the non-exempt income to be deferred until the company is listed or until the shares leave your hands, and for at most ten years from delivery. It is a very favourable regime, which is why the status is worth checking, although it is rarely met by the US parent companies we review.
What we deliver when the case is closed
Twelve pages that follow an equity pay case from start to finish, with the amounts at each milestone, the practical questions around exercise and the doctrine consulted. It is a real report from the firm, anonymised, and written in Spanish.
When part of the work was done outside Spain
It is common with these profiles: two years in another country, three in Spain, and delivery arrives while you are resident here. The generation period is split, and with it the taxing rights of the two states under the applicable treaty. Rebuilding it takes contracts, calendars and residence certificates for the years involved, and it is documentary work that starts beforehand, not afterwards. What we do not offer is advice on the other country's tax: if it is needed, the client appoints the adviser there and we coordinate with them.
Three questions worth asking the company
They belong to human resources, not to your adviser, and they can be answered by email:
- Is there an agreement recharging the cost to the Spanish entity? Whether there is a payer in Spain obliged to make the payment on account depends largely on that.
- Does the plan allow taxes to be covered by keeping back shares, and which country does that withholding go to?
- What exactly happens to what has vested if I leave the company before the event?
The answers, in writing, are worth a good deal more than any estimate made without them.
What we wish we were asked earlier
The most worthwhile engagement in this service is the one that arrives while the liquidity event has not yet happened: the number of units is known, the value can be estimated and there is time to set money aside and prepare the evidence. The one that arrives in May, with delivery already made the previous December, can only calculate properly and pay.
If you are in the first situation, tell us about it here. And if you would first like to see how we handle a complete file, the page for this service links to a real, anonymised report.