My RSUs Show Up on Both My W-2 and My T4. How Do I Avoid Double Tax?

Seeing the same tranche on two slips doesn’t tell you that two governments are taxing the same money. Three things settle it, and each keys to its own event. Where you worked between grant and settlement builds the split. Each country’s own inclusion trigger fixes when that country includes the income, and the two triggers are different tests. The move date decides which country holds the right to tax the whole amount, and that country is the one whose return carries any credit for the other country’s tax. The credit is capped by the crediting country’s own limit, and each country sizes its own share under its own rules, so nothing makes the two shares add up to the tranche.

Why is the same RSU income on my W-2 and my T4?

Because the two systems were built separately and neither one reports the other’s numbers. Canada and the US each fix their own taxing moment for share compensation in their own law, and the two triggers are different tests that can land in different years. Nothing in either country’s rules makes the two slips line up, so the same tranche described twice doesn’t tell you how much of it each country actually gets to tax. That part turns on where you worked between grant and settlement, and on which country was your residence country, which turns on the move date.

“the excess of … the fair market value of such property … at the first time the rights … are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, over … the amount (if any) paid for such property, shall be included in the gross income of the person who performed such services in the first taxable year in which the rights … are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable”

That’s the US moment, in IRC section 83(a). Note what it keys to: the first year the rights are transferable or not subject to a substantial risk of forfeiture, whichever comes earlier. Canada’s runs off a different provision and a different word. Where a qualifying person has agreed to sell or issue securities to an employee and the employee has acquired securities under that agreement, ITA subsection 7(1)(a) deems the benefit received “in the taxation year in which the employee acquired the securities”. The CRA lists a restricted stock unit plan as one of the arrangements those rules cover, and says that where you’re a non-CCPC employer the benefit goes into the employee’s income in the year the employee acquired the shares (CRA, Employee security (stock) options).

So Canada keys to acquisition, and the same CRA page defines acquisition and vesting as separate terms rather than one moment. It defines “Vested” as “the time when the employee can first exercise, sell or transfer the rights”, and sets out the difference between the two products this way: restricted stock units “may have a vesting period for securities rights (after acquiring securities)”, while standard stock option plans “may have a vesting period for the option rights (before acquiring securities)”. On CRA’s own model of an RSU, acquisition can come first and the vesting period can run after it.

That agreement condition matters too. The same CRA page says that where there was no security option agreement, or no intention in the agreement for securities to be issued, the benefit is taxable instead under ITA subsection 5(1) or paragraph 6(1)(a), and goes in for the year the employee received the payment. The example the CRA gives of no intention to issue securities is “a phantom stock plan or stock appreciation plan”. A cash settlement is a different case and it is worth not guessing at: where the employee disposes of their rights under a security option agreement, has the option of receiving either shares or cash, and elects to cash out, the same page puts the payment under ITA paragraph 7(1)(b) or 7(1)(b.1) and includes it “in the taxation year in which your employee cashes out the options”. So the route and the year both turn on what the plan documents say, rather than on whether what arrives is cash.

The upshot is that the two countries key their inclusion to different events in their own words, and on some plan facts that can put the two inclusions in different calendar years. What follows from a split like that isn’t something this page settles, and it’s worth raising on your own plan documents rather than assuming either answer.

Which country actually gets to tax an RSU that vested after I moved?

Both can, within limits, and the treaty sets the order. Under Article XV(1) as replaced by the Fifth Protocol, employment remuneration derived by a resident of one country is taxable only there unless the employment is exercised in the other, and if it is, the other country may tax it too. Once you’re a non-resident of Canada, Canada’s reach runs to duties performed in Canada and, where you were resident in Canada at the time, duties performed outside Canada as well. So your residence country, which the move date decides rather than either inclusion trigger, holds the right to tax the whole amount.

Event	What Canada taxes, and when	What the US taxes, and when	Which country credits which
Grant	Where the plan is an agreement to issue or sell securities, no ITA 7(1)(a) benefit arises at grant, because that paragraph deems the benefit received in the year the employee acquired the securities and none have been acquired yet. That isn’t a statement that the grant is free of tax for every purpose	IRC 83(a) applies to property transferred in connection with the performance of services, and it keys inclusion to the first taxable year the rights are transferable or aren’t subject to a substantial risk of forfeiture, whichever comes earlier. Whether anything lands at grant turns on that test applied to the rights under your own plan, rather than on the grant	No credit question arises until one of the two countries has actually included the income
Period between grant and settlement, spanning the move	No taxing moment during the period. The days worked in Canada in this window, and the days worked outside Canada while you were still resident in Canada, are part of what ITA 115(1)(a)(i) and operative Article XV(1) (Schedule VI) give Canada a claim over once you’re a non-resident, and Canada sizes that claim under its own rules, so it needn’t mirror the US fraction in the next column. Where the right is one under a subsection 7(1) agreement, it’s an excluded right or interest, so the departure-day deemed disposition in ITA 128.1(4)(b)(iii) doesn’t catch it: what Canada does and does not deem you to have sold on the day you leave	No inclusion during the period. The days of performance of the services in this window are what the time basis in Treas. Reg. 1.861-4(b)(2)(ii)(A) and (E) counts, on both limbs of its fraction, applied to multi-year compensation by (F). For an RSU the attributable period is a facts-and-circumstances determination, and an alternative basis may be used under (b)(2)(ii)(C)(1)(i) if the individual establishes it. This fraction is a US-side computation and doesn’t fix Canada’s share	Nothing yet, since no inclusion has occurred on either side at this event
Inclusion, each country on its own trigger	Trigger: the year the employee ACQUIRED the securities, where the plan is an agreement to issue or sell securities and the employer isn’t a CCPC (ITA 7(1)(a); CRA security options page), and the CRA’s own page says an RSU’s vesting period can run AFTER acquisition. For a non-resident the reach is duties performed in Canada and, where the person was resident in Canada when performing them, duties performed outside Canada (ITA 115(1)(a)(i)), which operative Article XV(1) permits Canada to tax as the state where the employment was exercised, subject to the XV(2) carve-out. Canada computes its portion under its own rules and no CRA fraction for an RSU is cited here	Trigger: the first taxable year the rights are transferable or aren’t subject to a substantial risk of forfeiture, whichever comes earlier (IRC 83(a)), which is a different test from Canada’s and can fall in a different year. The full amount is included. For a US resident the Canadian-workday portion is foreign-source under IRC 862(a)(3), on a time basis under Treas. Reg. 1.861-4(b)(2)(ii)(A), (E) and (F), the attributable period being facts and circumstances for an RSU and an alternative basis available under (b)(2)(ii)(C)(1)(i). Read this cell as the US-side figure, rather than as the other half of the Canada cell; the two needn’t sum to the tranche	Which country is the residence country is fixed by the MOVE date, rather than by either inclusion trigger. The residence country is the one that credits the other’s tax on the portion that other country was entitled to tax. For a US resident that’s IRC 901(b)(3) and Article XXIV(1) (Schedule II), subject to the section 904 limitation named in 901(a). Where the two triggers land in different years, what follows isn’t settled here
Sale of the shares after settlement	For a non-resident, capital gains reach Canada only where the property disposed of is taxable Canadian property (ITA 115(1)(b)). Whether particular employer shares are that is a definitional question this page doesn’t settle	Gain on the sale is sourced by the seller’s residence under IRC 865(a): inside the US if a US resident sells, outside it if a non-resident does. The inclusion and the sale are two separate events, and no basis rule is stated here	Name what each country is taxing before assuming a credit. At this event the US is sourcing a gain on personal property by residence, while Canada reaches a non-resident’s gain only where the taxable-Canadian-property test is met

Which text you read matters here. The Fifth Protocol deleted and replaced paragraphs 1 and 2 of Article XV and renamed the article “Income from Employment” (Schedule VI, Article 10), so the 1980 body is stale for both paragraphs. One of the changes was dropping the word “similar” from paragraph 1, and the Treasury technical explanation says that was “intended to clarify that Article XV applies to any form of compensation for employment, including payments in kind” (Treasury, technical explanation of the 2007 protocol). A share settlement is what that sentence is talking about.

There’s a carve-out sitting on top of all of this. Operative Article XV(2) leaves the remuneration taxable only in the residence country if it doesn’t exceed ten thousand dollars in the other country’s currency, or if the recipient is present in that other country for no more than 183 days in any twelve-month period commencing or ending in the fiscal year concerned and the pay isn’t borne by a resident or permanent establishment there. Which year or years you apply those tests to is the live question when an amount settles years after the workdays. Two statements in the Treasury technical explanation bear on it, and they sit in different places. In its general discussion of new paragraph 2, on the ten thousand dollar limb, it says “It is understood that, consistent with the prior rule, the safe harbor will apply on a calendar-year basis.” Inside the stock option note it goes further, saying the paragraph 2 tests “are applied to the year or years in which the relevant services were performed in the other Contracting State (and not to the year in which the option is exercised or disposed)”. That second statement is written for an option, and whether it carries to a unit that isn’t one isn’t settled here. Which country you’re resident in is its own question with its own date: which year you become a US resident, and whether your first return is dual-status.

How is the split between Canada and the US calculated?

There’s a published US method and there isn’t a published Canadian one. For US sourcing, compensation for services performed partly inside and partly outside the US is sourced on a time basis, the workday fraction, and multi-year pay is sourced that way over the period it’s attributable to. Canada’s side is a principle rather than an arithmetic: as a non-resident you’re taxed on duties performed in Canada and, where you were resident in Canada at the time, duties performed outside Canada too. Each country computes its share under its own rules, so don’t assume the two figures are halves of one sum.

“The source of multi-year compensation is determined generally on a time basis … over the period to which such compensation is attributable. … The determination of the period … is based upon the facts and circumstances of the particular case. … In the case of stock options, the facts and circumstances generally will be such that the applicable period to which the compensation is attributable is the period between the grant of an option and the date on which all employment-related conditions for its exercise have been satisfied (the vesting of the option).”

Read that to the end and you can see the gap. Treas. Reg. 1.861-4(b)(2)(ii)(F) gives you the method, and the only instrument it hands a default attributable period to is the stock option. For an RSU the period stays a facts-and-circumstances determination, so “grant to settlement” is a position taken on the facts rather than a rule you can point at. The time basis itself is the workday fraction under paragraph (b)(2)(ii)(E), and it’s a default rather than the only permitted method: under (b)(2)(ii)(C)(1)(i) an individual may use an alternative basis on establishing to the Commissioner’s satisfaction that it more properly determines the source, with documentation kept.

On the Canadian side there’s no equivalent formula to quote. ITA paragraph 115(1)(a)(i) brings a non-resident’s income from “the duties of offices and employments performed by the non-resident person in Canada and, if the person was resident in Canada at the time the person performed the duties, outside Canada” into Canadian taxable income, and operative Article XV(1) permits Canada to tax employment exercised there. Read that second limb, because it’s the one people drop: Canada’s claim isn’t confined to Canadian workdays. It also reaches days you worked outside Canada while you were still a Canadian resident, which on a cross-border move is the ordinary fact pattern. Neither provision supplies a fraction, and no CRA allocation method for restricted stock units turned up in the sources locked for this page. So Canada’s share is computed on the facts under Canadian rules, and the two countries’ shares aren’t guaranteed to add up to the tranche.

Does the treaty’s stock option rule apply to my RSUs?

The treaty does carry a stock option allocation rule, and by its own words it doesn’t cover restricted stock units. It’s paragraph 6 of Annex B, the 2007 note exchange the notes themselves say “shall be annexed to the Convention as Annex B thereto and shall therefore be an integral part of the Convention”. So it’s operative treaty text rather than commentary. What it operates on is the exercise or other disposal of an option granted to an employee to acquire shares or units, and its formula is written in option vocabulary from end to end.

“the individual shall be deemed to have derived, in respect of employment exercised in a Contracting State, the same proportion of such income that the number of days in the period that begins on the day the option was granted, and that ends on the day the option was exercised or disposed of, on which the individual’s principal place of employment for the employer was situated in that Contracting State is of the total number of days in the period on which the individual was employed by the employer”

That’s Annex B, paragraph 6(a), and every date in it is an option date. The CRA describes the two products differently on exactly the point the formula turns on. A security option is an arrangement under which the employer “offers the employee the opportunity to purchase a specified number of shares in the corporation (or units in a mutual fund trust) at a specified, pre-determined price”, and “as the term option implies, the employee is under no obligation to purchase the security being offered by the employer”. A restricted stock unit plan is one where the employer “can agree to issue or sell securities to their employees” and “the employees acquire securities subject to certain conditions” (CRA, Employee security (stock) options). The grant of an option, an option price, and an exercise are described there as features of the option, not of the unit. The Treasury technical explanation reads the paragraph the same way, describing a fraction running between the grant and the exercise or disposal of the option (Treasury, technical explanation of the 2007 protocol, a document the same explanation says the Government of Canada has reviewed and subscribes to). Paragraph 6(b) then lets the two competent authorities attribute income differently where an option grant is really a transfer of ownership, which is again an option question.

So the Annex tells you what the two governments agreed for the instrument it names, and the instrument it names is the option. Going further than that, and allocating an RSU on the Annex by analogy, is a position with nothing in the text behind it. It’s also worth not assuming the two rules would give the same answer if you did. They don’t count the same thing: Annex B 6(a) runs on the days the individual’s “principal place of employment for the employer was situated in that Contracting State” over “the total number of days in the period on which the individual was employed by the employer”, while Treas. Reg. 1.861-4(b)(2)(ii)(E) runs on “the number of days of performance of the labor or personal services by the individual within the United States” over “total number of days of performance”. Different numerator, different denominator.

Which country gives me the credit, and on which return do I claim it?

Your residence country is the one giving the credit, and it credits the other country’s tax on the portion that other country was entitled to tax. Which country that is turns on the move date, rather than on either country’s inclusion trigger. For someone who has moved and whose inclusion lands while they’re a US resident, that puts the credit on the US return. IRC section 901(b)(3) allows a resident alien a credit for income taxes paid or accrued to a foreign country, and 901(a) makes that credit subject to the section 904 limitation, so the credit is capped rather than automatic.

“In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a citizen or resident of the United States … as a credit against the United States tax on income the appropriate amount of income tax paid or accrued to Canada”

That’s Article XXIV(1) as replaced by Schedule II, the First Protocol, which is the operative text for that paragraph. Running the other way, for someone whose residence country is still Canada, Article XXIV(2)(a) as replaced by Schedule IV has Canada deduct US income tax on profits, income or gains arising in the US, and ITA subsection 126(1) is the domestic mechanic, with its own express limit in paragraph (b). Article XXIV(3)(a), which no protocol replaced, is what makes the plumbing work: income of a resident of one country that the other may tax under the Convention is deemed to arise in that other country for relief purposes.

The relief is written as a credit against tax, on both sides, and both sides carry a cap. Sizing it means running two returns against each other on your own numbers, which is a different exercise from working out the allocation.

What happens when I sell the shares after they vest?

The inclusion and the sale are two separate events, and the sale runs on a source rule that has nothing to do with workdays. Under IRC section 865(a), income from the sale of personal property by a US resident is sourced in the US, and by a non-resident outside the US, so the gain follows where the seller lives. On the Canadian side, once you’re a non-resident, capital gains reach Canada only through dispositions of taxable Canadian property, and whether a given block of employer shares is that is its own question worth checking on your facts.

“the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were taxable capital gains and allowable capital losses from dispositions … of taxable Canadian properties (other than treaty-protected properties)”

That’s ITA paragraph 115(1)(b), and it’s a gateway rather than an answer. What your US basis is in shares you already paid tax on at inclusion is a separate rule under provisions this page doesn’t carry, so work it from the plan statements and the settlement-date reporting rather than from anything written here. If your Canadian residence ended before the securities were acquired, the date it ended is worth pinning down on its own: the date Canadian residence actually ends.

What should I do next?

Get the workday record before you get the tax advice. Pull the grant and settlement dates for every tranche, then the days you performed services in each country between them. Then pin the two inclusion dates separately, because they’re different tests: the year you acquired the securities, which is Canada’s trigger where the plan is an agreement to issue or sell securities and the employer isn’t a CCPC, and the first year the rights were transferable or no longer at substantial risk of forfeiture, which is the US one. The move date comes last and decides which return carries the credit.

• Confirm from the plan documents whether your employer is a CCPC, because the CRA’s inclusion year differs between CCPC and non-CCPC employers.
• Confirm whether the plan is an agreement to issue or sell securities, because if it isn’t, the CRA routes the benefit to ITA 5(1) or 6(1)(a) and to the year the payment was received instead.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.