RSU and stock-option taxation in Canada — for FAANG and cross-border tech transfers
Disclaimer up front: this is the most lawyer-eats-tax-advisor territory in personal finance. The rules are real, but their application to your specific stock plan depends on grant date, vest schedule, residence-tie dates, and your employer's reporting. Read this to understand the shape of what you're dealing with, then pay a cross-border CPA $400–$800 for the actual filing. Worth every dollar.
That said — the basics are knowable, and most cross-border tech transferees overpay tax by thousands because they (or their accountant) don't apply the right rules. Here's what to understand before you sit down with a pro.
How are RSUs taxed in Canada?
RSUs vest as ordinary employment income in Canada — same as your salary. The fair market value of the shares on the vesting date is added to your T4 income, taxed at your marginal rate (combined federal + provincial up to ~53.5% in BC, ~53.53% in Ontario). When you later sell the shares, any gain above the vest-day value is a separate capital gain (50% inclusion rate, currently). See CRA: Employee stock options and shares.
The high-level model: vest day = ordinary income, sell day = capital gain or loss. Same as the US model in concept. The complication is what happens during a cross-border move.
RSUs that already vested before you became Canadian tax resident
Not taxed by Canada as income. Those vests were US-source income while you were a US resident. However, Canada's "deemed acquisition" rule resets the cost basis of those shares to fair market value on the day you became a Canadian tax resident. When you later sell, only the gain ABOVE that step-up value is a Canadian capital gain. Keep your brokerage statement from your residence-change date — it's the only documentation of your stepped-up basis.
Example: you have 100 vested AMZN shares with US cost basis of $150/share. You move to Canada on March 15, 2026, when AMZN trades at $280. Your Canadian cost basis for those shares is $280 (the step-up), not $150. If you sell at $320 a year later, your Canadian capital gain is $40 × 100 = $4,000, not $170 × 100 = $17,000. The step-up saves you about $3,500 in tax at a 50% inclusion × 53% marginal rate.
Critical action: print or PDF the brokerage statement from your residence-change date showing all positions and market values. You'll need it forever — CRA can ask years later.
RSUs that vest after you become Canadian-resident (the apportionment rule)
If a tranche was granted while you worked in the US but vests after you move to Canada, Canada apportions the income based on the fraction of the vesting period spent in Canada. Example: you got a 4-year RSU grant; you worked 2 years in the US, then moved to Canada for the remaining 2 years. Canada taxes 50% of each post-move vest as Canadian-source employment income. The other 50% remains US-source — your US W-2 still reports it, and Canada gives you a foreign tax credit for the US withholding on that portion.
The mechanics, step by step:
- Each RSU tranche has a 1-year vesting period (typical FAANG: quarterly tranches from a 4-year graded grant).
- Determine fraction of that tranche's vesting period spent in Canada. Example: tranche vesting Sept 15, 2026, with 1-year vest window from Sept 15, 2025 → Sept 15, 2026, and you moved to Canada on March 15, 2026. Canadian period = 184 days out of 365 = 50.4%.
- That 50.4% of the vest's fair market value is Canadian employment income.
- The other 49.6% is US-source income reported on your US W-2. Your US employer withheld US federal tax on it.
- On your Canadian T1, claim a foreign tax credit (form T2209) for the US tax withheld on the Canadian-resident portion. CRA: Form T2209 instructions.
- Result: you pay approximately the higher of the two countries' marginal rates on that portion, not both.
If your employer is FAANG-tier, their payroll team handles the mechanics automatically and your T4 will reflect the apportioned Canadian-source amount. Smaller employers often get this wrong — verify your T4 matches the math, or your CPA can recompute.
How are stock options taxed differently from RSUs?
Two scenarios. Canadian-employer options on publicly-traded shares qualify for a 50% deduction (only half the benefit is taxable) — more tax-efficient than RSUs. US-employer options exercised while you're Canadian-resident generally do NOT get this 50% deduction; they tax as ordinary employment income, like an RSU. ISOs (US incentive stock options) lose their US AMT preferential treatment once you're Canadian-resident. NSOs are taxed at exercise either way.
For most FAANG transferees: the equity comp you transferred with is RSUs (not options), and options are rare. If you DO have ISOs or NSOs from your US employer, talk to a cross-border CPA before you exercise — the timing of exercise can shift tens of thousands in tax in either direction.
ESPP shares
ESPP (Employee Stock Purchase Plan) shares you bought while US-resident don't get any Canadian "purchase discount" benefit recognition. When you sell, your Canadian cost basis is the fair market value on your residence-change date (the deemed-acquisition step-up). Any prior US-side discount or compensation income doesn't transfer to Canadian tax. Same rule as RSUs that already vested: keep the residence-change date brokerage statement.
If you continue to participate in a US ESPP after moving to Canada (some employers allow it), the discount portion at purchase becomes Canadian-source employment income — same as RSU vesting. Most US ESPPs disallow non-resident participation, so this is rare.
T1135 — the form newcomers miss most
If the total cost basis of your foreign property (US brokerage holdings, foreign bank accounts, etc., EXCLUDING personal-use real estate) exceeds CAD $100,000 at any point during the year, you must file form T1135 with your T1. Penalties for failing to file start at $2,500 and escalate to $12,000+ for repeat offences — even though T1135 itself isn't a tax, just a disclosure. Most FAANG transferees cross the $100K threshold instantly.
What counts toward the $100K:
- US brokerage holdings: Fidelity / E*Trade / Morgan Stanley accounts holding your vested RSUs, ESPP shares, and any other US-listed stocks.
- Foreign bank accounts: your US checking/ savings account balance.
- Foreign-listed property from your home country (Indian mutual funds, UK ISA, etc.) — but use of "specified foreign property" definitions; some retirement accounts may be excluded.
What does NOT count: personal-use real estate (your old US house if you didn't rent it), Canadian RRSP/TFSA/FHSA holdings, your Canadian primary residence.
Form: CRA T1135. File with your T1 by April 30.
Five expensive mistakes cross-border tech transferees make
The most expensive cross-border-RSU mistakes: (1) not capturing the residence-change-date brokerage snapshot (loses step-up basis evidence — costs $3K-30K in future capital gains tax), (2) ignoring T1135 because "it's just a disclosure" ($2.5K+ penalties), (3) double-paying tax by missing the foreign tax credit on apportioned RSUs, (4) selling vested US RSU shares from inside a Canadian TFSA (15% US withholding tax that you can't recover), (5) hiring a regular Canadian accountant who doesn't know cross-border rules.
- Skipping the residence-change-date snapshot. PDF your US brokerage statement on the day you become Canadian- resident. Without it, CRA can challenge your stepped-up basis years later. Costs: thousands in extra capital gains tax.
- Skipping T1135. "I'll do it next year" = $2,500 minimum penalty, escalating. File it.
- Missing the foreign tax credit. Make sure your CPA claims FTC on form T2209 for US-withheld tax on the Canadian-resident portion of your apportioned RSU income. Otherwise you double-pay.
- US dividend-paying shares in a TFSA. The US-Canada tax treaty exempts RRSPs from the 15% US dividend withholding tax, but NOT TFSAs. Hold US dividend-payers in RRSP; hold non-dividend US growth stocks or Canadian dividend payers in TFSA.
- Regular Canadian accountant. Cross-border tax is a specialty. Pay a CPA who specifically advertises "US-Canada cross-border tax" — typically $400–$800 for your first complex year. Worth it.
Where to go next
For first-year tax filing logistics (when, where, how to file your first T1 even with $0 Canadian income), Issue 06 next Sunday covers it. For registered-account priority before deploying your RSU proceeds, see Issue 02. For the full first-year playbook, the pillar guide.
Specific situation question? Drop it here — I read every one, and cross-border-RSU questions become future deep-dive issues.
— Sushil