My Employer Withheld 70% on My RSU Vest After I Transferred to Canada
If you transferred from a US office to a Canadian office of the same employer and your RSUs vested after the transfer, you may have experienced combined withholding of 60% to 70%+ on the vest. This is not a tax rate. It is the result of two payroll systems (US and Canadian) each withholding independently on the same income, without coordinating to avoid overlap.
The actual tax owed on the RSU income is determined by the allocation of the income between the two countries (based on the service period), the applicable rates in each country, and the foreign tax credit. The combined tax is typically 30% to 45%, depending on the income level, the province, and the state. The excess withholding (the difference between what was withheld and what is actually owed) is recoverable when you file your tax returns, but it can take months, and the cash flow impact at vest is significant.
The double withholding happens because the US employer withholds US federal tax (up to 37%) + state tax (where applicable) + Social Security + Medicare on the portion of the RSU income allocated to US service, and the Canadian payroll system withholds Canadian federal tax + provincial tax + CPP + EI on the portion allocated to Canadian service. If the allocation between the two countries is not coordinated at the payroll level (and it often is not), both systems may withhold on the full amount, or the allocations may overlap. The combined withholding exceeds the actual combined tax. You recover the excess by filing in both countries and claiming FTCs.
How RSU income is allocated
RSU income from a cross-border transfer is allocated based on where you performed the services during the vesting period. If the RSU was granted with a 4-year vesting schedule, and you worked in the US for 3 years and in Canada for 1 year of that period, approximately 75% of the income is US-source and 25% is Canadian-source.
US sourcing: the US taxes the portion of the RSU income attributable to US service days during the vesting period. The allocation formula is: (US service days during the vesting period) / (total service days during the vesting period) x total RSU income at vest.
Canadian sourcing: Canada taxes the portion attributable to Canadian service days. Under ITA 7(1), the employment benefit from stock options (and RSUs, which are treated similarly) is included in income in the year of vest (or exercise). The allocation to Canada is based on the service period in Canada relative to the total service period.
The overlap risk: if the US payroll system withholds on the full income (treating it as 100% US-source because the grant was made while you were a US employee), and the Canadian payroll system also withholds on its allocated portion, the total withholding exceeds 100% of the allocated income.
What happens at vest
A typical scenario: you have 1,000 RSUs vesting. The stock price at vest is $100. Total income: $100,000.
US payroll withholding (on the US-allocated portion): If the US system allocates 75% to the US ($75,000):
- Federal supplemental rate: 22% (or 37% if over $1 million in supplemental wages for the year)
- State tax: varies (0% in Texas/Florida, up to 13.3% in California)
- Social Security: 6.2% (if below the wage base)
- Medicare: 1.45% (+ 0.9% Additional Medicare if applicable)
- Approximate US withholding on $75,000: $22,000 to $28,000
Canadian payroll withholding (on the Canadian-allocated portion): If the Canadian system allocates 25% to Canada ($25,000):
- Federal + provincial tax: combined marginal rate of 40% to 53% depending on province and total income
- CPP: applicable on the employment income
- EI: applicable up to the maximum
- Approximate Canadian withholding on $25,000: $10,000 to $13,000
Combined withholding: $32,000 to $41,000 on $100,000 of income (32% to 41%). This is within the normal range.
But if the allocations are not coordinated:
The US system withholds on the full $100,000 (treating it as 100% US-source):
- US withholding: $30,000 to $37,000
The Canadian system also withholds on $25,000 (its allocated portion):
- Canadian withholding: $10,000 to $13,000
Combined: $40,000 to $50,000 (40% to 50%), with both systems withholding on some of the same income. At higher income levels, the US supplemental rate jumps to 37%, and the combined withholding can reach 60% to 70%.
How to recover the excess
US return (Form 1040): report the full RSU income. Apply the allocation to determine US-source and foreign-source portions. Claim the FTC (Form 1116) for Canadian tax on the Canadian-source portion. If US withholding exceeds the actual US tax (because the payroll system over-withheld), the excess appears as a refund on the return.
Canadian return (T1): report the Canadian-allocated portion of the RSU income. Claim the FTC (ITA 126) for US tax on the US-source portion. If Canadian withholding exceeds the actual Canadian tax, the excess appears as a refund.
The timing gap: the RSUs vest and the combined withholding takes 60%+ of the value immediately. You file your returns in April of the following year. The refunds process over the next 2-6 months. The cash flow gap can be 6 to 18 months.
What can your employer do?
Large multinationals with global mobility programs often coordinate the payroll allocation between countries so that the combined withholding matches the actual combined tax. This requires:
- Payroll coordination: the US and Canadian payroll teams (or the global mobility team) agree on the allocation percentages and apply them to each country’s withholding
- Tax equalization (if applicable): some employers offer tax equalization, where the employer covers the incremental tax cost of the transfer. Under equalization, your tax is calculated as if you had stayed in one country, and the employer pays the difference.
- Hypothetical tax deduction: some employers deduct a “hypo tax” (the tax you would have paid in your home country) from your compensation and then handle the actual tax filings in both countries.
If your employer has a global mobility program, ask whether the RSU withholding will be coordinated. If the employer does not have a program (common for smaller companies), the payroll systems will likely withhold independently, and you will need to recover the excess through your tax filings.
The Section 83(b) election does not help here
Some people ask about the Section 83(b) election for RSUs. IRC 83(b) allows you to elect to include the value of restricted property in income at grant (instead of at vest). For RSUs, the election is generally not available because RSUs are unfunded promises to deliver stock, not actual property transfers. Even if it were available, it would not solve the cross-border withholding problem; it would only shift the timing of the income recognition.
What should I do next?
If your RSUs are vesting after a cross-border transfer, contact your employer’s payroll or global mobility team before the vest date. Ask whether the withholding will be coordinated between the US and Canadian payroll systems. If not, prepare for the cash flow impact and file both returns as early as possible to recover the excess.
- I work remotely for a US employer from Canada, the broader employment tax picture
- Form 1116: why isn’t my FTC dollar for dollar?, the FTC mechanics for recovering the overlap
- Canada vs US tax rates, the rate comparison that determines the actual combined tax
The Cross-Border Assessment is a fixed $249. You get a written, CPA-reviewed allocation of the RSU income and a plan to coordinate withholding and recover the excess.
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Yarik Yarosh, CPA. "My Employer Withheld 70% on My RSU Vest After I Transferred to Canada." Blue Cloud CPA, August 21, 2026. https://bluecloudcpa.com/guides/rsu-double-withholding-transferred-to-canada
This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.