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Old 16.08.2012, 17:35
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Tax on shares

Afternoon all,

My employer (EQIX) has been doing well on NASDAQ since I joined (coincidentally) which is great, except that it appears I'm being taxed at source on the value of Restricted Stock Units (RSUs) and Employee Share Purchase Program (ESPP) shares as they are issued, at market, whether or not I hold or sell. The result is that the tax on the shares wiped out my June and most of July salary and is about to hit August and possibly September too!

I'm on a B permit (presumably if I were on a C or were a citizen I'd pay retrospectively?) and am waiting to hear back from my accountant on it, but in the mean time do any of you have any advice?

- Is this at the highest marginal rate, and if so will I get the difference back at tax time?
- What happens to taxes deducted on issue by the broker ("sell to cover")?
- Is it ok to sell immediately or is there some benefit (e.g. avoiding capital gains tax) in holding the shares for a certain period?
- Anything else you care to share?

Thanks!

Sam
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Old 16.08.2012, 17:58
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Re: Tax on shares

Are you sure it is the tax that is wiping out the salary? My husband's espp was purchased back in March, I think. We thought we signed up for taking it out of the paycheck each month and in Feb an amount was deducted that corresponded to that amount. However, something happened, we aren't sure if we didn't "tick" the right box of the next correspondence we had, and all of March and part of April's pay was "gone". What happened was, instead of us taking out the money each month, we paid for it all up front. So this wasn't a tax issue, but rather us buying the stocks.
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Old 16.08.2012, 18:06
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Re: Tax on shares

I just checked my June payslip and what they've done is added it to my salary for the purpose of tax calculations (resulting in a much higher marginal rate for that month as well as a much higher income!) and then subtracted it again from the bottom line, resulting in a -ve number that also wiped out most of the next month. This is in addition to the 15% contribution each month, which was also taken in June.
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Old 16.08.2012, 18:53
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Re: Tax on shares

There is no CGT in CH on shares in CH, only CGT fixed property. If your a pro trader you will be taxed as income.
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Old 16.08.2012, 19:00
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Re: Tax on shares

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I just checked my June payslip and what they've done is added it to my salary for the purpose of tax calculations (resulting in a much higher marginal rate for that month as well as a much higher income!) and then subtracted it again from the bottom line, resulting in a -ve number that also wiped out most of the next month. This is in addition to the 15% contribution each month, which was also taken in June.

Ours was confusing as well, I still don't really get it but it was definitely us paying for the shares (and taxed on the benefit bit, I think) but not taxed on the shares. Are you still thinking that it is a tax that has wiped out all that salary?
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Old 16.08.2012, 19:04
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Re: Tax on shares

Not quite that simple. It is true that private capital gains are tax free (and you sound to be very unlikely to qualify as a professional trader).

The OP doesnt say he is being taxed on the change in capital value of his shares, but on their market value at grant. Are you paying for the units or being granted them free of charge or very cheaply. If the instruments are being issued at a discount to fair value, then there may well be income tax.

However if the units have strong restrictions etc, then market value is quite high taxable value. How many of there are you at EQIX in CH? Did you ask your employers HR if they have a ruling covering this topic? They almost certainly will if you are numerous or have senior staff based here.

As mentioned in plenty other threads on the forum, if you are on more than 120kchf you will fill out a tax return and the marginal rate issue will be neutralized in due course.
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Old 17.08.2012, 11:03
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Re: Tax on shares

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Afternoon all,
- Is this at the highest marginal rate, and if so will I get the difference back at tax time?
- What happens to taxes deducted on issue by the broker ("sell to cover")?
- Is it ok to sell immediately or is there some benefit (e.g. avoiding capital gains tax) in holding the shares for a certain period?
- Anything else you care to share?
Sam
Sounds normal to me.

Unless you are Swiss or hold a C permit, the company has to withold Social Contributions and Income tax on any gain. i.e. when RSUs vest or when your ESPP shares are purchased at a discount (the gain for ESPP is the difference between the purchase price and the market value of the shares).

If on a C Permit, the company just has to withold Social contributions and tax is sorted when you file your tax return.

My experience with RSUs is that on vest my company's broker sells enough shares to pay the maximum Social contributions on the gain/income (6.75%). I then get a refund on my payslip if I reached the maximum ceiling for any component of the social contributions.

Income tax on the gain is taken out of my paycheck as you describe. It's just counted as income on top of your normal salary, so it's not taxed at the highest marginal rate.

For ESPP, the entire gain is simply added as income on my paycheck and social/tax deducted regularly.

Fortunately (?!) it was not enough to wipe out earnings for a month. But assuming you earn more than CHF120,000 any 'additional' tax paid as a result of the higher rate for that month will be refunded next year after your tax return is filed.

Also note that if you don't sell your RSUs or ESPP stock by the end of the tax year (31st Dec 2012), you have to declare them as 'assets' on your tax return. The value of them is assessed for Wealth tax (a very low rate), just as money in the bank is.

Stu
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Old 17.08.2012, 13:02
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Re: Tax on shares

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My employer (EQIX) has been doing well on NASDAQ since I joined (coincidentally) which is great, except that it appears I'm being taxed at source on the value of Restricted Stock Units (RSUs) and Employee Share Purchase Program (ESPP) shares as they are issued, at market, whether or not I hold or sell. The result is that the tax on the shares wiped out my June and most of July salary and is about to hit August and possibly September too!
You don't get taxed on RSUs until they vest, in which case they will be considered as income and you have to pay income tax + social contributions on them. Various arrangements are done by companies to avoid having to pay a huge amount, like selling some of the shares to pay for the tax liability and you would only have to pay the social / pension contributions.

As for the ESPP, if they are not restricted then just sell some of them to cover your tax / social / pension liabilities either automatically by your own company or through who over holds the shares for you. If they're restricted then AFAIK you don't have to pay anything on them apart from tax on dividends.

I am not even sure if you even pay wealth tax on RSUs, as their value can not be determined until the vesting date.

Last edited by The_Love_Doctor; 17.08.2012 at 13:18.
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