RSU Taxes in Canada | How RSUs Are Taxed

Restricted Stock Units are a common form of equity compensation in Canadian tech, and the tax treatment follows a two-event structure: the full fair market value at vesting goes on your T4 as employment income (taxed at your marginal rate), and your cost base resets to that vesting price so you’re only taxed once. The larger risk is often concentration rather than the tax: if your salary, bonus and RSUs all depend on one company, a stock drop hits your income, savings and net worth at the same time. RSUs are one of the equity-pay guides in this directory of taxable employment benefits.

RSU Basics

How RSUs Work

Term	Meaning
RSU	Restricted Stock Unit
Grant	Company promises future shares
Vesting	When you actually receive shares
Restriction period	Time until vesting

RSU Timeline

Event	What Happens
Grant date	Promise of future shares
Vesting schedule	Usually 3-4 years
Vesting date	Shares transfer to you
Sale	Whenever you choose

Tax Treatment

Two Tax Events

Event	Tax Type
Vesting	Employment income
Sale	Capital gain/loss

At Vesting

What’s Taxed	Full FMV of shares
Reported as	T4 employment income
Rate	Your marginal rate

Example

Details
RSUs vesting	100 shares
FMV at vesting	$50/share
Taxable benefit	$5,000

This $5,000 is added to your T4 income, the same way other taxable employment benefits are.

How Tax is Withheld

Common Methods

Method	How It Works
Sell-to-cover	Employer sells shares to pay tax
Net settlement	Receive fewer shares (net of tax)
Cash payment	You pay the tax separately

Sell-to-Cover Example

RSUs vesting	100 shares
Total value	$5,000
Tax owed (~40%)	$2,000
Shares sold	~40 shares
Net shares received	~60 shares

Withholding Rate

Typical Rate	~25-40%
May not match	Your actual rate
Shortfall	Pay at tax filing
Excess	Refunded at filing

Checking the withholding rate against your marginal tax rate shows whether a vest will leave a balance owing at tax time.

When You Sell the Shares

Your cost base for RSU shares is their fair market value at vesting, because you’ve already paid tax on that amount: 60 shares received at $50 have a cost base of $3,000, so selling them later for $4,200 is a $1,200 capital gain. Canada uses the average cost of identical shares, so shares from several grants are pooled; the adjusted cost base guide shows how to track it across vests and sales, and the capital gains inclusion rate page covers how much of the gain is taxed.

RSU vs Stock Options

Feature	RSU	Stock Options
What you get and what it costs	Shares at vesting, $0 cost	Right to buy shares at the exercise price
Tax	Full FMV at vesting is employment income; no 50% deduction	Benefit at exercise; the 50% deduction may apply

The stock options taxation guide covers the deduction’s conditions and CCPC deferral.

Managing a Large Vest

Approach	Trade-off
Sell at vesting	Reduces concentration and fixes the value; may miss later gains; trading restrictions may apply
Hold long-term	Keeps the upside and the company-specific risk
Partial sell	Balances both

The tax at vesting is the same whichever you choose: it is based on the vesting price, not on what you do with the shares. Selling at vesting and reinvesting through a TFSA or RRSP is one way people diversify.

A large vest can push income into the top tax brackets in one year. An RRSP contribution reduces taxable income and charitable donations earn a tax credit; if tax owing at filing gets large, CRA may require instalments.

Recording and Reporting

Your T4

What’s Included
Box 14	Includes RSU benefit
Box 38	Security options benefits

What to Track

Information	Why
Grant details	Vesting schedule
Vesting dates	Each vesting event
FMV at vesting	For cost base
Shares received	Actual net shares
Sales	For capital gains

Special Situations

Company Goes Public (IPO)

Before IPO	Private company RSUs
At IPO	May trigger vesting
Lock-up period	Can’t sell immediately
Tax due	Even if can’t sell

Leaving the Company

Scenario	Effect
Unvested RSUs	Usually forfeited
Vested RSUs	Yours to keep
Check agreement	For specifics

US-Based Employer

A Canadian resident is taxed in Canada on RSUs from a US employer; any US withholding may be claimed as a foreign tax credit, and the W-8BEN form is used for US tax purposes.