RS (Restricted Stock) refers to actual shares granted to you, subject to certain restrictions (such as vesting or forfeiture conditions). Because you already hold the shares at the time of grant, you are considered a shareholder from the outset, even though your ability to dispose of the shares is restricted.
RSU is a promise by the company to deliver shares in the future once specified vesting conditions are met. Until vesting occurs, an RSU holder has only a right to receive shares—not shareholder status.
If you receive RS or RSUs whose underlying shares are issued by a foreign company for your services performed in Japan, the value in principle constitutes Japan taxable salary income, but the tax is not generally settled through withholding by the local employer in Japan. As a result, you are required to report the income yourself by filing an annual income tax return.
Tax Timing
- RS: Taxable when you receive the shares. Taxation may be deferred until the restriction is lifted, only if certain designated conditions under the Japanese Income Tax Act are satisfied.
- RSU: Taxable upon vesting, i.e., when your right to receive the shares becomes fixed and determinable.
