We use cookies on our website. By clicking "I accept", you consent to use cookies and to the processing of your personal data for analytical and marketing purposes in accordance with your browser settings. You can withdraw your consent at any time. Raczkowski sp.k. is the controller of personal data. Your data may also be processed by our Trusted Partners. By clicking "Manage cookies" you can see the list of our Trusted Partners and change your cookie settings. More information about your rights can be found in our Privacy Policy.

Income from RSU for individuals on B2B occurs twice | PRO HR Tax View

2021.05.05

In the opinion of the Director of the National Fiscal Information (KIS), income arises twice for a taxpayer conducting individual business activity (B2B) who acquires Restricted Stock Units (RSU) free of charge as part of an incentive programme organised by his business partner, i.e. both at the time of the exercise of the rights arising from the RSU (free of charge acquisition of shares) and at the time of the subsequent sale of the shares. 

Factual state

In the interpretation under discussion, the Applicant (consultant) indicated that it provides services in the IT area to its contracting party - an American company - in the B2B model. The American company is the organiser of a stock incentive programme addressed to directors, employees and consultants. The programme allows outstanding consultants to be awarded prizes in the form of derivative financial instruments linked to shares issued by the US company. The service contract between the consultant and the US company includes the opportunity to participate in this programme and information about the possibility of granting awards. 

It is this type of instrument that the consultant received from the US company free of charge. At the time the RSU were granted, the consultant did not receive the right to freely dispose of the shares of the US company due to the 4-year restriction period imposed. In addition, at the time the RSU were acquired, the value and number of shares that the consultant will acquire in the future cannot be determined. This is because, firstly, the value of the underlying RSU (i.e. the shares of the U.S. company) is subject to constant currency fluctuations and, secondly, the consultant may lose some RSU (and, as a result, never receive the target pool of RSU granted) if, during the restriction period, its relationship with the U.S. company ends. 

In the consultant's opinion, the income from a gratuitous acquisition of shares should be qualified to the source of income which is cash capitals and should be taxed at 19% only at the time of disposal of shares of the American company.

Comment

The Head of the KIS (National Fiscal Information) did not agree with the consultant's standpoint and stated that under the incentive program, the consultant will have to recognize tax income twice:

  • When the RSU is realised - as income from business activities

The Director of the KIS (National Fiscal Information) pointed out that the incentive programme in which the consultant participates does not meet the prerequisites of an incentive programme, in which taxation of the shares received arises only at the time of disposal of the shares in the foreign company. In this case, tax revenue will already arise at the time of the RSU exercise and the gratuitous acquisition of shares in the US company. This income will be classified as business income and will be taxed as other income on this account.

  • At the time of sale of shares - as income from cash capitals

The authority stated that on the part of the consultant income will also arise at the time of sale of shares in the American company and it will be income from capital funds taxed at 19%. However, the consultant will be entitled to reduce this income by the cost of its acquisition in the amount of the income it previously earned and taxed on the exercise of the RSU.