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The article is based that all employees are resident in Japan all through the period from grant of stock awards up to selling shares, and that the employee is hired by local employer in Japan, which is a subsidiary/branch of an overseas holding company. The potential tax liability is up to your company’s situation.

What is restricted stock unit in Japan?

The awards where the employees receive a right to acquire shares are defined as the restricted stock unit in Japan.

 

Grant date

  • Employee and Employer – No tax liability

Vesting date

  • Employee –The difference between the market value of the shares at vesting and the price which the participant paid on award should be taxable.
  • Employer – No tax liability

Withholding tax

  • Employee – If there is a recharge from the parent company to the Japanese employer, the income tax liability of the employees are subject to withholding by the employer.
  • Employer – The income tax withholding need to be withheld and remitted to the tax authorities with the regular monthly tax payments wherever it is required

Sales of shares

  • Employee – The capital gain is taxable. The gain equals that the market value on disposal minus the market value of the shares on the exercise date.
  • Employer – No tax liability