International Equity Comp: What Changes When You Work Across Borders

Equity comp crossing national borders is one of the hardest planning problems a tech employee will encounter. A single RSU grant can be sourced partly to the United States, partly to Ireland, partly to Singapore, depending on where the employee worked during the vesting period. Each country claims taxation rights on its share. Treaties may or may not apply. Foreign tax credits may or may not offset the US bill. And the employer’s equity plan was almost certainly designed for US-only employees, which means your W-2 is usually wrong by default.

The general rule is this: most countries tax equity comp based on where the services were performed during the vesting period, not where the employee lived at grant or at vest. A four-year RSU granted while working in the US, where the employee moves to London two years in and vests at year four, typically sources two years of the gain to the US and two years to the UK. Each country wants its share.

This guide walks through the source rules for RSUs and options, the treaty positions that matter most, the double-tax mechanics for the inbound-to-US and outbound-from-US cases, and the specific planning moves that actually work.

The source rule for RSUs

Most developed-country tax systems, including the United States, source equity comp based on the workdays principle. The income is apportioned to each country based on the ratio of workdays in that country during the vesting period (from grant date to vest date, or for performance-based awards, from grant to performance completion).

US source rule: under Treas. Reg. §1.861-4 and related guidance, compensation from services is sourced to where the services were performed. For RSUs that vest over four years, the four-year vesting period is the service period. Workdays in the US during that period generate US-source income; workdays outside generate foreign-source income.

This matters for two reasons. First, the US taxes nonresidents on US-source income, so even a nonresident employee who vests US-granted RSUs owes US tax on the US-source portion. Second, residents of the US are taxed on worldwide income regardless of source, with a credit for foreign tax paid, so source determination drives the foreign tax credit calculation.

Example. US-based engineer granted 10,000 RSUs at $20 on January 1, 2023, vesting 25% annually. Relocates to London full-time on January 1, 2025. The second vest (January 1, 2024) at $40 is 100% US source ($100k ordinary income). The third vest (January 1, 2026) at $60 is half US-sourced (2023-2024 in US) and half UK-sourced (2025-2026 in UK). $150k total, $75k US source, $75k UK source. The US taxes its share; the UK taxes its share. Treaty relief may eliminate the double tax but requires coordinated reporting.

The US side for outbound employees

A US citizen or green-card holder is taxed on worldwide income regardless of where they live. Moving abroad does not stop US tax on RSU vests.

Foreign earned income exclusion (IRC §911) excludes up to $130,000 (2025) of foreign earned income if the employee meets the physical presence test (330 days in foreign country in a 12-month period) or the bona fide residence test. RSU vesting income attributable to foreign workdays generally qualifies.

Foreign tax credit (IRC §901) offsets US tax by foreign tax paid on the same income. For high earners above the FEIE threshold, the FTC is usually the primary double-tax relief.

The practical problem: most US payroll systems do not automatically apportion the RSU vesting income on the W-2 by workday source. The W-2 reports 100% as US wages. The employee has to manually allocate on Form 1040 using a statement showing foreign workdays, and claim the foreign tax credit or FEIE on Form 2555 and Form 1116.

State tax adds another layer. California and New York apply “trailing nexus” rules to equity granted during in-state residency that vests after departure. California Publication 1005 and the California Residency Handbook are the operational references.

The US side for inbound employees

A foreign national moving to the US for a job typically enters as a nonresident for tax purposes on arrival, then becomes a resident after passing the substantial presence test (183 days on a sliding-year count under IRC §7701(b)).

RSUs granted before US arrival: the vesting income is partially foreign-sourced (for vesting days before arrival) and partially US-sourced (for vesting days during US residency). The US can tax the US-sourced portion; the foreign country typically taxes the foreign-sourced portion.

Section 457A is a trap for inbound assignees from certain jurisdictions. If the employee worked for a foreign partnership or foreign corporation in a tax-haven jurisdiction, deferred compensation subject to §457A must be included in US income when no longer subject to substantial risk of forfeiture. This can accelerate US taxation of foreign-deferred equity.

§83 applies to stock received by inbound employees, but the valuation and timing rules interact with foreign tax treatment. An 83(b) election on restricted stock acquired before arrival may or may not have effect for the foreign country. Uncoordinated elections can create double tax or double non-tax situations.

Treaty positions. The US has income tax treaties with about 70 countries. Most treaties follow OECD Model Article 15 (dependent personal services), which sources compensation to where services are performed. Treaty tiebreakers (Article 4) determine residency when both countries claim the employee as a resident; typical tests are permanent home, center of vital interests, habitual abode, and citizenship in order.

The employer-equalization question

Many companies offer tax equalization to internationally mobile employees. The company pays the employee’s actual foreign tax and in exchange withholds a hypothetical US tax from the paycheck. The employee is economically neutral regardless of where they are assigned.

Tax equalization sounds simple but creates complicated compensation for equity grants. The hypothetical tax is calculated each year using a shadow return. Equity grants vesting during an equalized assignment are included in the hypothetical calculation. When the assignment ends and the grant continues to vest in the home country, equalization typically drops off, and the employee suddenly owes actual tax on the continued vests without the employer offset.

If you are offered equalization, read the policy carefully for how equity grants are treated at assignment end. The two common policies are “grants in flight” continuing to be equalized through vest, or grants reverting to actual tax treatment on assignment end. The second is cheaper for the company and more expensive for the employee.

Withholding and reporting mechanics

US employer with foreign-resident employee: the employer must withhold US federal tax on the US-source portion of RSU vesting, typically at the 30% nonresident rate unless a treaty reduces it or the employee files Form W-8BEN claiming treaty benefits. FICA may or may not apply depending on the employee’s work location and any totalization agreement between the US and the employee’s country.

Foreign employer with foreign-resident employee who previously worked in the US: the foreign employer typically has no US payroll obligation. The US nonresident employee still owes US tax on the US-source portion of any vest, reportable on Form 1040-NR with Schedule NEC. Most employees in this position do not realize the obligation exists and under-report.

Totalization agreements between the US and about 30 countries (including most of Europe, Japan, South Korea, Canada) prevent double FICA/social security taxation. Certificate of coverage from one country exempts the employee from the other country’s social tax.

A worked cross-border example

Ana is a Spanish citizen hired by a US tech company to work in its Madrid office in January 2024. She receives 5,000 RSUs at $50 (grant-date value $250k), vesting 25% annually over four years.

In January 2026, she transfers to the San Francisco office on an L-1 visa. She passes the substantial presence test in 2026 (she is in the US 260+ days).

The January 2027 vest at $80 per share ($400k total value):

• Vesting period: January 2024 through January 2027, 36 months.
• Spain workdays: 24 months (66.7%) → Spain-source income $266,667.
• US workdays: 12 months (33.3%) → US-source income $133,333.
• Spain taxes the Spain portion; Ana files a Spanish annual return.
• US taxes Ana as a US resident on worldwide income, so all $400k is on her 1040.
• Ana claims foreign tax credit on Form 1116 for the Spanish tax paid on the Spanish portion.
• Net federal US tax depends on the FTC calculation; if Spain’s rate on the Spanish portion exceeds the US rate on the same portion, the credit is capped.

Spain’s rates and treaty positions are the variables that move the answer. This is the kind of case that needs a cross-border CPA.

Frequently asked

Do I need to file in every country I worked during a vesting period? Potentially, yes. Each country with source income may require a return. Many countries have de minimis rules (183 days of physical presence, treaty tie-breakers) that eliminate filing for short assignments, but without specific analysis, the default assumption is a return is due.

What about the Foreign Bank Account Report (FBAR)? Required for US persons with foreign financial accounts aggregating over $10,000 at any point in the year. Filed on FinCEN Form 114, separately from the tax return. Unrelated to the equity comp treatment but often triggered for internationally mobile employees.

Can I renounce US citizenship to avoid worldwide taxation? Yes, but the exit tax under IRC §877A applies to high-net-worth expatriates. Unvested RSUs and unexercised options are generally treated as if vested/exercised on the expatriation date, triggering immediate US tax. This is rarely an efficient move.

What if my country does not have a US tax treaty? The general sourcing rules still apply, but without treaty relief double tax may occur in full. Foreign tax credit is still available under IRC §901 and typically provides meaningful relief.

Does the UK’s NIC or Germany’s social tax interact with US FICA? If there is a totalization agreement with the employee’s country, the employee generally pays only the home country’s social tax. Without an agreement, both may apply. Get a Certificate of Coverage before the move.

Next step

Cross-border equity taxation is always specific. A generic cross-border CPA is the minimum; for high-value grants or multi-country scenarios, engage tax counsel in both relevant jurisdictions. The cross-border apportionment calculator estimates the source split for RSUs and options based on workday allocation. Do this before each tax year closes, not when the return is due.