RSUs in Spain. That the figure does not exist in Spanish law is not a technicality: it means your case is settled by reading your plan and your residence history, not by applying a general rule. Two people at the same company, with the same grant, can end up paying different amounts.
Sophie Laurent is Belgian, has lived in Barcelona since 2020 and runs the Spanish office of a medical devices company listed in New York. In 2022 she received 5,000 stock appreciation rights (SARs) with a base price of 40 USD, exercisable from 2024 and for ten years. The share trades at 58 USD today. A former colleague, who had options, tells her he had to take out a loan to exercise. Sophie does not understand why she does not need to put up any money, or whether that means she is taxed differently. SARs resemble options in the calculation and differ in the outlay, and that difference has specific tax consequences.
A right to be paid the rise, not a right to buy
A SAR entitles you to receive the appreciation on a number of shares between a base price and the value on the exercise date. You do not have to buy anything. If the share rises from 40 to 58 USD, Sophie receives 18 USD for each SAR. An option, by contrast, entitles you to buy the share at 40 USD: to obtain the same advantage, the holder must first pay the exercise price and then, if they want cash, sell.
The company can pay a SAR in two ways, and the plan says which:
| Form of settlement | What Sophie receives | Nature of the income for Spanish income tax |
|---|---|---|
| In cash (cash-settled) | Money equal to the rise | Cash employment income |
| In shares (stock-settled) | Shares worth the equivalent of the rise | Employment income in kind |
| Comparable option | Shares in exchange for paying the price | Employment income in kind on the spread |
The guide on phantom shares and SARs explains the common framework.
When a SAR accrues
Until Sophie exercises, she holds a conditional right whose value changes every day; nothing is payable. On exercise, the company becomes obliged to pay her that day's appreciation. Article 14.1.a) of the Spanish Income Tax Act allocates employment income to the period in which it is payable: the year of exercise. Neither the 2022 grant nor the 2024 vesting produces income.
Some plans provide for automatic exercise at expiry if the SAR has value. In that case the accrual date is set by the plan, not by Sophie, and it is worth noting down because it may fall in a year in which she would rather not add that income.
Sophie's figures under each form of payment
We assume an exchange rate of 0.92 € to the dollar on the day of exercise.
If the SAR is settled in cash:
- Appreciation per SAR: 58 − 40 = 18 USD.
- Total: 5,000 × 18 = 90,000 USD.
- In euros: 82,800 € of cash employment income.
- The company, or the Spanish subsidiary where Sophie provides her services, must withhold on the payment.
If the SAR is settled in shares:
- Value to be delivered: 90,000 USD.
- Shares she receives: 90,000 / 58 = 1,551 shares, with the remainder in cash for the fraction.
- Employment income: the same, 82,800 €, but in kind.
- On the part in kind a payment on account is made, not a withholding.
- Those 1,551 shares have as their acquisition value the amount on which they were taxed. When she sells them, she will calculate her capital gain or loss from there.
If she had held 5,000 options at 40 USD:
- She would have to pay 200,000 USD to exercise.
- She would receive 5,000 shares worth 290,000 USD.
- Employment income: 90,000 USD, the same as with the SAR.
The employment base is the same in all three cases. What changes is the money you have to lay out in advance, the number of shares you end up holding and, with it, your exposure to whatever the share price does next.
Although a SAR settled in shares involves a free delivery of shares, the exemption in article 42.3.f) requires, among other conditions, that the offer be made on the same terms to all employees. SARs are usually reserved for executives, and that normally rules out the exemption. We cannot confirm that a particular plan meets it without reading it.
Withholding and the foreign payer problem
When the SAR belongs to a foreign parent and is settled by its plan administrator, the money or shares may reach Sophie without passing through the Spanish payroll. The rule in article 99.2 of the Spanish Income Tax Act places the obligation to withhold or pay on account on the resident entity where the employee provides services when the payer is a related entity. In practice, the subsidiary needs the parent to report each exercise to it. If it does not, Sophie will declare the full income without withholding and should have set the amount aside; we cover this in nothing has been withheld.
If you would like us to review whether your SAR plan is settled in cash or in shares and what follows from that, you can send it through the equity form.
The 30 % reduction and recurring grants
Sophie received her SARs in 2022. If she exercises them in 2026, the generation period exceeds two years and she could apply the 30 % reduction in article 18.2, with its cap of 300,000 € of income and provided she has not used it in the five previous periods. If her company grants her SARs every year and she exercises them in stages, the five-year rule will block almost every exercise except one per window. See the 30 % reduction.
After a share-settled exercise
If Sophie's SAR is settled in shares, her tax story does not end on the day of exercise. Suppose that a year later she sells the 1,551 shares at 62 USD, with a rate of 0.90 € to the dollar on that date:
- Transfer value: 1,551 × 62 × 0.90 = 86,545.80 €.
- Acquisition value: 1,551 × 58 × 0.92 = 82,761.36 €, which is what was taxed as employment income for those shares. The 42 USD for the fraction paid in cash were also taxed as employment income, but they are not part of the cost of any share.
- Capital gain: 3,784.44 €, less selling costs, in the savings base.
Had she kept the shares instead of selling and had the price fallen, the loss would go to that same savings base, with no effect on the tax she already paid on the employment income.
Choosing when to exercise
Since a SAR requires no outlay, the temptation is to wait for the share to rise further. That is an investment decision, not a tax one: the employment income will be higher if the share rises and lower if it falls, and in both cases it is allocated to the year of exercise. What is a tax matter is choosing the year. If Sophie expects a year with lower income, exercising then reduces the part taxed in the upper bands of the scale. If she expects to opt into a special regime or to change residence, the year of exercise may decide which country taxes. For comparisons between instruments, you can read phantom shares or stock options and how phantom shares are taxed.
Appreciation rights and the other plans linked to the share value are explained on the Salama Tax page on employee equity, with the questions worth asking the company before exercising.