RSUs in Spain. There is no RSU as such in Spain: there is a delivery of shares that the law treats as payment in kind, with valuation and timing rules that depend on how your plan is drafted. It is the kind of question where one clause changes the final figure.
Mateo Rinaldi is Italian, has lived in Palma since 2021 and works for a forty-employee biotech start-up in Boston. He holds 25,000 vested options at an exercise price of 1.50 USD. The latest independent valuation puts the common share at 2.10 USD. An investor has told him that, if things go well, the company could be sold at 20 USD a share in three or four years' time. Mateo wonders whether he should exercise now, while the difference is small, or wait until there is a buyer. Tax pushes one way and risk the other, and neither force decides the matter on its own.
What you gain by exercising early
Employment income arises on exercise, and it is measured as the difference between the value of the share that day and the exercise price. If Mateo exercises while the difference is small, he locks in a small amount of employment income. Everything the share gains afterwards will be a capital gain when he sells, and capital gains go to the savings base, which has a different scale from employment income. That is the appeal.
If he waits and exercises just before the company is sold, the entire rise will be employment income and will be taxed in the general base, together with his salary. The mechanism of each moment is in when my stock options are taxed.
What you risk by exercising early
To exercise, you have to pay the exercise price and, on top of that, the income tax (IRPF) on the spread, all without being able to sell the shares because there is no market. If the company fails, Mateo will have lost both. The tax paid on the employment income is not refunded; all he will get is a capital loss in the savings base, which can only be set against other gains and income in that base within the limits of the law. If he has no gains to offset it against, the loss may be of no use to him at all.
That is the asymmetry: exercising early swaps the risk of paying more tax in the future for the risk of paying tax today on something that may never be worth anything.
Mateo's numbers in three scenarios
We assume a rate of 0.90 € to the dollar on every date so as not to complicate the example.
If he exercises today:
- Exercise price: 25,000 × 1.50 = 37,500 USD = 33,750 €.
- Spread: 25,000 × (2.10 − 1.50) = 15,000 USD = 13,500 € of employment income.
- Acquisition value of his shares: 33,750 + 13,500 = 47,250 €.
- Money leaving his pocket today: 33,750 € plus the income tax on 13,500 € of general base.
If he waits and exercises on the sale at 20 USD:
- Spread: 25,000 × (20 − 1.50) = 462,500 USD = 416,250 € of employment income.
- He pays nothing until then; the exercise price is usually deducted from the sale price.
| Scenario in four years' time | Exercised today | Waited |
|---|---|---|
| Sale at 20 USD a share | 13,500 € of employment income today and 402,750 € of capital gain later | 416,250 € of employment income in the year of sale |
| Sale at 3 USD a share | 13,500 € of employment income today and 20,250 € of capital gain | 33,750 € of employment income in the year of sale |
| The company closes | 13,500 € of employment income already taxed and a capital loss of 47,250 € | Nothing: the options lapse at no cost |
The gain in the good scenario is calculated as follows: 25,000 × 20 × 0.90 = 450,000 € of transfer value, less 47,250 € of acquisition value, equals 402,750 €.
The table shows what matters. In the good scenario, exercising early moves more than 400,000 € from the general base to the savings base. In the bad one, Mateo loses 33,750 € of his own money plus the tax on 13,500 € of base, and his only consolation is a loss he may not be able to use. In the middle one, the difference is small: exercising early turns some 20,000 € of employment income into a gain, in exchange for having tied up 33,750 € for four years with no return and no way of selling if he needed the money.
Early-stage start-ups fail often, and a round at a better price does not guarantee an exit. Exercising early is a bet on the company's future, paid for partly with tax. We do not recommend one option or the other without knowing your assets, your liquidity and your tolerance for losing that money, and no recommendation guarantees the outcome.
Other pieces that change the sums
The 30 % reduction. If Mateo waits and exercises more than two years after the grant, the large spread could qualify for the reduction in article 18.2 on up to 300,000 € of income, if he has not used it in the previous five years. That narrows the advantage of exercising early. It is covered in the 30 % reduction.
Today's valuation of the share. Exercising at a low value is only advantageous if that value withstands a tax audit. If the company has just closed a much higher round, the spread declared may be challenged. We deal with this in what value to use if my company is not listed.
Early exercise of unvested options. Some plans allow exercise before vesting and deliver shares subject to repurchase if the employee leaves. When the income arises in that case is not obvious, because the shares do not fully belong to the employee. The plan needs studying before you sign. If you are a US citizen, early exercise also has consequences in the United States that your adviser there should explain to you.
The start-up regime. If the company were an accredited emerging company in Spain, the allocation of the income could be deferred. That is not Mateo's case, but it is explained in equity in a Spanish start-up.
Cash in the year of exercise
There is one last factor the table does not capture. If Mateo exercises today, the income tax on the spread is paid in the following year's filing campaign, with his own money, because the shares cannot be sold. If he waits for the company to be sold, the tax on a much larger spread is paid with part of the proceeds of the sale itself. Waiting concentrates more income in the base, but it comes with the cash to pay for it.
An orderly way to decide
Mateo can ask himself three questions before exercising:
- Can I lose the exercise price and the tax without it changing my life? If the answer is no, exercising early is a bet that is not his to make.
- Do I have foreseeable capital gains against which to use a possible loss? If not, the bad scenario is worse.
- Is there a deadline forcing my hand? If he leaves the company, the plan will give him little time to exercise, and the decision will be taken in a hurry. We explain this in I am leaving the company.
A middle path is to exercise only part: the part he could lose without difficulty. It spreads the risk and leaves the rest for when there is more information. You can send us the plan, the latest valuation and your vesting schedule through the equity form so that we can quantify the scenarios with your figures and your regional scale.
This kind of decision is addressed on the Salama Tax page on equity, which describes what data is needed to compare scenarios before exercising.