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What is a RSA?

Here we go into detail on giving away free shares, with binding. This instrument is mostly used to get the most out of taxation as capital tax.

Transfer ownership right away – and get lower taxes in cases where the stock price goes up

Restricted Share Award (RSA) is shares with a vesting period and / or vesting period that are transferred to the employee at the time of allotment. The shares provide voting rights and dividends as ordinary shares. However, the transfer of the shares is usually followed by a period where the shares cannot be traded and / or you must provide services to the company over this period to avoid having to list or sell the shares back. This results in a taxable value on the allotment date when you receive the value of the entire share. At the same time, the restriction leads to the “actual value” of the shares being reduced, and thus gives a lower taxable entry value.

As are often used in cases where it is seen that the upside in the tax situation by transferring the share immediately exceeds the disadvantage of potentially having to return shares and / or dealing with the tax situation in the event of a resignation or share price decline. Precisely due to challenges with administration in connection with possible reversals of shares and follow-up of tax, we see that RSAs are mostly used in “early phase” companies (share ownership typically due to lower salaries) and to a very limited number of key people in larger companies. In such cases, it is “worthwhile” to tackle a few more administrative challenges for the company and participants in order to optimize the tax situation, given that one is very positive about future share price development.

Benefits of RSA:

  • RSA gives immediate ownership and then also any right to dividends and voting rights.
  • Such a scheme is tax-efficient given that values ​​are to be raised and the participant has income tax that exceeds tax on capital gains.

Disadvantages of RSA:

  • Tax at the time of allotment, and shares are tied up (ergo can not sell a share to cover tax). This means that it can be tricky to pay a tax bill if this is not well thought out.
  • The company is charged with employer’s contribution costs upon allocation, which can be difficult to get back if the employee quits and has to return the shares. The same applies if the value eventually becomes lower. You do not get back Employer’s contribution.

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