@vip_indian wrote:
@Opus 17 I think the question is about RSU's that have vested already, not about yet-to-be-vested RSUs. Let me lay it out:
Employee is an alien with no US green card who is working in US since Jan 2017
RSU's were granted on 1 Jan 2018
All RSU's were vested on 1st Jan 2019 and employee paid income tax in the US
Employee relocates from US to India on 1st Jan 2021 (2 years after vesting of RSUs) i.e. becomes a non-resident alien
He sells his vested RSUs on 1st Jan 2022 ( 3 years after vesting of RSUs - but he's in Europe now )
Question - where / how will the capital gains be applicable - India or US? Will US broker withhold any tax? Employee does not have any other source of income in US.
I don't have the time to look this up for you, sorry. @pk is the best foreign tax person on this board.
@pk
However, by coincidence, I was recently reading about New York State income, and the IRS might follow the same rule.
In your situation, suppose you paid $0 for the stock in 2018, it vested in 2019 at $10 per share, and you sell it in 2022 at $15 per share. And suppose you were a New York State resident until 2020 and then moved to another state. New York would consider the value at vesting to be NY source income for state income tax ($10 per share), but the capital gains in 2022 ($5 per share) wouldn't be NY source income.
If we assume that principle applies to the IRS for federal taxes, then you owe US tax on market value at vesting (2019) but the capital gains in 2022 is not US-source income. (Because a gain on stocks in a US company that are sold by a non-resident alien is not considered US-source income.)
You should have paid income tax on the market value in 2019, so the gain now is not US income.
I assume capital gains are taxed in India, but I don't know anything about Indian tax laws.
Your US broker may be required to withhold up to 30% of the proceeds. You may qualify for reduced withholding if there is a tax treaty with India and you file a form W-8BEN with the broker. This is outside my area of expertise so hopefully someone else can help with this, or call the broker and see what they say. If taxes are withheld, you would file a form 1040-NR at the end of the year to report that the income was not US-source and get your withheld amount back as a refund.
