RSUs in Spain. Spanish law has no figure called an RSU. Your tax comes from three places at once: what the plan says, where you were resident while it vested, and what you did with the shares afterwards. Change one of the three and the answer changes, sometimes by a lot of money.
Noah Fischer was born in Zurich and has lived in Madrid since 2021. He works for a Chicago data analytics company that has just signed its sale to a large listed group. The email Noah has received mentions cash-out, rollover, escrow and earn-out in the same paragraph. He has 10,000 vested options at 5 USD, 4,000 unvested RSUs and no shares of his own. The agreed price is 30 USD a share, of which 15 % is held in escrow for eighteen months, plus an additional payment of up to 5 USD a share if the division reaches certain revenue targets within two years. Noah wants to understand what he will receive, when and in which tax return.
Three possible destinations for equity
An acquisition agreement usually settles what happens to employees' equity in one of these three ways, sometimes combined:
| Destination | What happens | Usual effect on Spanish income tax |
|---|---|---|
| Acceleration | Pending vesting is brought forward, fully or in part | Accelerated RSUs are delivered and taxed; accelerated options still have to be exercised or settled |
| Replacement (rollover) | Your options or RSUs are exchanged for equivalent ones in the buyer | In principle no income as long as one right is only swapped for another of the same kind |
| Cash settlement (cash-out) | The company pays you the value of your options or RSUs in money | Cash employment income when it becomes due |
The governing document is the merger or purchase agreement, together with the plan. The guide on how to read an equity incentive plan explains which clause governs a change of control.
Noah's case: options settled in cash
Noah's 10,000 vested options are settled in cash: he will not receive shares, but the difference between the deal price and his exercise price. That amount is employment income, because it arises from his employment relationship, and it is no longer in kind but in cash. We assume a rate of 0.90 € to the dollar:
- Gross value per option: 30 − 5 = 25 USD.
- Total: 10,000 × 25 = 250,000 USD = 225,000 €.
- Paid at closing (85 %): 212,500 USD = 191,250 €.
- Held in escrow (15 %): 37,500 USD = 33,750 €, to be released in eighteen months if the buyer makes no claims.
- Potential earn-out: up to 10,000 × 5 = 50,000 USD = 45,000 €, conditional on revenue targets.
As it is a cash payment, the Spanish subsidiary should make a withholding, not a payment on account as with a delivery of shares. If it does not, Noah still declares the full income.
Escrow: money held back that is not yet yours
The general rule in article 14.1.a) of the Spanish Income Tax Act allocates employment income to the period in which the recipient can demand it. The 191,250 € paid at closing are due that year and are declared in it. The 33,750 € in escrow are not due at closing: they depend on no claims arising and may be reduced or disappear. The reading consistent with the rule leads to allocating them when they stop being conditional and Noah can claim them, that is, when they are released.
The contract may complicate that conclusion, for example if the escrow is merely security for a payment that has already accrued rather than a condition. That is why the allocation of the escrow must be reviewed against the specific clause, and the answer is not free from debate.
Earn-out: income that may never arrive
The earn-out is an additional payment that depends on future results. As long as the targets are not met, Noah is entitled to nothing. If in two years the division reaches the agreed revenue and he receives 45,000 €, that amount will be employment income for the year in which it becomes due. If only half the target is met and he receives 22,500 €, that is what he will declare. If it is not met, there is no income.
This is the logic for employees who receive the earn-out in respect of their options or RSUs. For shareholders selling their own shares, the earn-out is part of the sale price and follows the rules on capital gains, including the possibility of allocation for transactions with a deferred price under article 14.2.d). We explain it in the company is bought and my shares are paid for.
Some employees, out of caution, include the escrow and the maximum earn-out in the return for the year of closing. If they do not then receive it all, recovering the excess requires applying for the return to be corrected, with its own procedure and deadlines. Allocating to the wrong year, too much or too little, can lead to adjustments. We cannot assure you what view a reviewing authority will take.
Unvested RSUs: replacement or acceleration
Noah's 4,000 pending RSUs can take one of two paths:
- If they are replaced by RSUs in the buyer, they will keep a vesting schedule. There will be no income on the exchange, and each tranche will be taxed when delivered, at the value of the buyer's shares on that day. We explain this in how RSUs are taxed.
- If they are accelerated, they will be delivered at closing or paid in cash, and their whole value will be employment income for that year. At 30 USD and 0.90 € to the dollar, that would be 4,000 × 30 × 0.90 = 108,000 €.
Full acceleration on the change of control alone (single trigger) is less common than acceleration that also requires a later dismissal (double trigger). In the second case, the RSUs are replaced first and are only accelerated if Noah loses his job within a later period.
When the buyer offers a choice
Some agreements let employees choose between being paid in cash or receiving equity in the buyer. The choice has consequences: cash fixes the income and the year; replacement defers it, but moves the risk onto the buyer's share and a new vesting schedule. If Noah chooses replacement and then leaves the group before vesting, he may lose what he would have received at closing. It is a decision best taken with the figures for both alternatives in front of you.
Everything lands in the same year
If Noah adds the cash-out of his options to an acceleration of RSUs, he could include more than 300,000 € of employment income in a single year, on top of his salary. The 30 % reduction may apply to income with a generation period of more than two years, with the 300,000 € cap and the five-year rule. In a cash-out, each grant has to be analysed by its date.
You can send us the acquisition agreement or, at least, the communication to employees with the breakdown by instrument, through the equity form, so that each payment is placed in its year.
If you already held exercised shares
Had Noah exercised options earlier and held shares of his own, selling those shares in the deal would be a capital gain, not employment income, with an acquisition value equal to the price paid plus the spread taxed on exercise. Unless the agreement makes part of the price conditional on his staying with the company: then that part may be salary. See the company is bought and my shares are paid for.
Acquisitions are the moment when the most equity instruments are settled at once, which is why they have their own section on the Salama Tax page on pay in shares.