RSU taxation in Germany: what falls due in the vesting year and when an investment deduction helps

At listed groups, share-based pay has long been a fixed part of compensation, often spread over four years with annual or quarterly tranches. For tax purposes it is unremarkable while the tranches are small. It becomes noticeable in the year in which a large grant vests or the share price has risen sharply: a five- or six-figure amount then lands in taxable income at once, without any cash reaching the bank account.

Step by step: when receipt takes place, what the employer withholds, whether the fifth rule or § 19a EStG help, what a price drop after vesting means for tax and how an investment deduction (Investitionsabzugsbetrag, IAB) under § 7g EStG works in such a year. The figures come from our own calculation for a sample case with a salary of 130,000 euros and an RSU receipt of 90,000 euros.

When are RSUs taxed in Germany?

When the shares are booked into your account. A restricted stock unit is at first only a promise to receive shares after a waiting period. Nothing happens for tax purposes when it is granted. Wages are received (Zufluss) when you obtain economic control over the shares; for shares, the tax authorities take this to be the day they are booked into your account (BMF letter of 1 June 2024, para. 25, citing BFH of 20.11.2008, VI R 25/05). Contractual lock-up or holding periods after that do not postpone receipt; only a legal impossibility to dispose of the shares does (para. 26; BFH of 30.06.2011, VI R 37/09).

What is taxed is the market value of the booked shares on that day, as income from employment under § 19 EStG. That the shares often come from a foreign parent company changes nothing: wages granted by a third party within the employment relationship are also subject to wage tax if the employer knows about them, and for affiliated companies this is assumed (§ 38 (1) sentence 3 EStG). For social security, RSUs are earnings too (§ 14 SGB IV), but contributions are only due up to the contribution ceilings, in 2026 101,400 euros a year for pension insurance and 69,750 euros for health insurance. Anyone whose salary already exceeds them pays no further contributions on the RSUs.

If RSUs lapse because you leave before vesting, they were never received and are not taxed. Conversely, every vesting tranche counts in its own calendar year; a four-year plan therefore creates four or more tax years with share-based pay.

How do RSUs, stock options and employee purchase plans differ for tax?

Mainly in timing and in what is measured. With stock options, nothing is received when the option is granted; wages arise only with the discounted acquisition of the shares after exercise, in the amount of the difference between market value and exercise price (BFH VI R 25/05). With purchase plans in which staff buy shares at a discount, only the discount is wages. For these cases there is the allowance of § 3 No. 39 EStG of 2,000 euros a year, but only if the offer is open to all employees who have been employed for at least one year (§ 3 No. 39 sentence 2 EStG). RSU plans for selected employees usually do not meet that condition.

What does the employer withhold at vesting?

Wage tax as on a bonus. The RSU receipt is an other payment (sonstiger Bezug); the employer computes annual wage tax on the expected annual wages once without and once with the receipt and withholds the difference (§ 39b (3) EStG). For high earners that lands close to the marginal rate, i.e. 42 percent plus solidarity surcharge. Because the receipt consists of shares rather than money, many plans automatically sell part of the shares at vesting to cover the tax (sell-to-cover); others withhold it from the regular salary.

The final tax is only fixed by the assessment notice. Differences arise for example with the tax class combination III/V, with several employers or when the price moves between booking and payroll. A tax return is therefore worth filing as a check; the application for the fifth rule and an IAB are only available there in any case.

Does the fifth rule apply to RSUs and stock options?

For options usually yes, for RSUs it is open; for high earners the question often makes no difference. Remuneration for work spanning several years is taxed at a reduced rate under § 34 (1) EStG (Fünftelregelung); spanning several years means the work extends over at least two calendar years and more than twelve months (§ 34 (2) No. 4 EStG). For stock options the Federal Fiscal Court has generally confirmed this where more than twelve months lie between grant and exercise and the employee was employed during that time (BFH of 18.12.2007, VI R 62/05). There is no Federal Fiscal Court ruling on the merits for RSUs. The Cologne fiscal court treated RSUs with a multi-year waiting period as an incentive wage for a period, but on the question of which country may tax (judgment of 02.10.2014, 15 K 2686/11). Whether the tax office accepts an annually vesting tranche as remuneration for several years depends on the plan terms.

Since 2025 the employer no longer applies the fifth rule in wage tax withholding; it is only available through the tax return. What it achieves is shown by our calculation: with a salary of 130,000 euros and a receipt of 90,000 euros it saves nothing, because the salary alone already sits in the 42 percent band and the fifth of the receipt stays there. Only an IAB of 90,000 euros pushes the remaining income down to 38,770 euros; the fifth rule then saves an additional 5,503 euros. The same mechanism for severance payments is described in investing a severance payment tax-efficiently.

Does § 19a EStG help with RSUs from a large group?

Almost never. § 19a EStG defers taxation of equity stakes that the employer transfers in addition to the wages already owed, designed for start-ups and mid-sized companies. At the time of transfer the company may have at most 100 million euros of turnover or 86 million euros of balance sheet total, fewer than 1,000 employees and be no more than 20 years old; it is enough if this was the case in one of the six previous years (§ 19a (3) EStG; BMF letter of 1 June 2024, para. 42). A group company only qualifies if all group companies together stay below these thresholds (§ 19a (1) sentence 3 EStG). For RSUs from a large listed group the rule is therefore ruled out.

Anyone granted equity in a young company should know the rule: the deferral must be chosen in wage tax withholding with the employee's consent and cannot be claimed later in the tax return (§ 19a (2) EStG). Tax becomes due later when the stake is transferred, after 15 years or when employment ends (subsection 4 sentence 1); the last two triggers fall away if the employer irrevocably assumes liability for the wage tax (subsection 4a). If at least three years have passed since the transfer when the deferred tax falls due, the fifth rule applies.

What happens for tax if the share falls after vesting?

The wage tax stays; the loss lands in a different pot. Booking fixes the wages; a later price drop does not lead to negative wages (BMF letter of 1 June 2024, paras. 27 to 29). From then on the shares are private assets, and their acquisition cost is the taxed market value. A later sale produces capital income in the amount of the difference (§ 20 (4) sentence 1 EStG); for shares quoted in US dollars, purchase and sale are each converted into euros at that day's rate, so the currency movement is part of the result.

A loss from selling shares may only be set against gains from selling shares (§ 20 (6) sentence 4 EStG), not against interest or dividends and certainly not against salary (§ 20 (6) sentence 1). Whether this restriction is constitutional has been under review by the Federal Constitutional Court since 2021 (2 BvL 3/21); there was no decision as of October 2026. What this means in the sample case:

The asymmetry is the real point: on the way in the market value carries 44.3 percent, on the way out a loss relieves at most 26.4 percent and only if other share gains exist. Anyone holding RSUs for years therefore carries a double risk: that of a single share and that of the employer who also pays the salary. This does not automatically argue for selling on the vesting day. It argues for making the decision deliberately; a sale right after vesting triggers practically no further tax, because proceeds and acquisition cost are the same.

What does an investment deduction achieve in the vesting year?

It lowers tax at the same marginal rate the RSUs are taxed at. An IAB under § 7g EStG deducts up to 50 percent of the planned acquisition cost of an asset from the business's profit, up to three years before the acquisition (§ 7g (1) and (3) EStG). With a direct investment in a solar or storage plant this creates a loss from a business that is offset against wages in the same year, RSUs included. What has to be in place for this is explained in the requirements of the IAB and the IAB explained simply.

In the sample case an IAB of 90,000 euros takes back the entire tax on the RSUs, 39,879 euros. The money is not a gift: the IAB is added back to profit at acquisition and reduces the depreciation base, so the tax moves into later years. The benefit lies in the interest on this deferral and in the fact that the income later often meets a lower tax rate, for example in retirement. Employees can apply to have the loss entered as an allowance in wage tax withholding during the year; this is described in saving tax as an employee.

Is the IAB worth more in the vesting year than otherwise?

Only if the spike lifts you into a higher tax band. This is the result that sounds least like a rule of thumb. If your salary already sits in the 42 percent band, a deduction in an ordinary year saves almost as much as in the vesting year; in the sample case even 345 euros more, because the lower income after the deduction falls into the phase-in zone of the solidarity surcharge. It looks different if the receipt crosses the threshold of the top rate or if the salary alone is still below the 42 percent band.

Profile C shows the case in which timing really matters: the same deduction saves 6,588 euros more in the vesting year than in a year without a receipt. Because a vesting schedule is fixed years in advance, this can be planned; an IAB then belongs in the year of the large tranche, and the investment has to follow by the end of the third subsequent year. How to dose the deduction over several years is described in Using the investment deduction every year: building a portfolio over multiple years; which deadlines run, in Forming the IAB now: which tax deadlines and time windows count in 2026/2027.

What speaks against a direct investment in the vesting year?

Five points that belong in every decision:

• The IAB defers, it does not waive. The tax returns through the add-back and the lower depreciation; if no investment follows, the deduction is reversed retroactively with interest.
• Liquidity. A direct investment ties up equity for many years. RSUs only become money once sold; anyone who wants to keep the shares needs the equity from other funds.
• Concentration risk shifts, it does not disappear. A share in your employer becomes a stake in a single plant with risks of its own: yields, power prices, technology, contract partners.
• A business of your own. The direct investment is a commercial business with a tax return, profit calculation and possibly VAT. Ongoing management can be outsourced, responsibility cannot.
• § 15b EStG. If a direct investment is subscribed as a ready-made package whose prospectus puts the tax saving at the centre, the loss can be blocked as a tax deferral model (BFH of 02.10.2025, IV R 14/23). How to draw the line is set out in The loss created by an investment deduction (IAB): offsetting it against salary, carrying it back and carrying it forward.

Which questions should you clarify before the next vesting date?

• Which tranches vest in the coming years? In which year is the receipt highest? Which tax band does it reach?
• How does your plan cover the tax: sell-to-cover, deduction from salary or not at all? Does the RSU receipt appear on your wage tax certificate?
• Will you keep the shares or sell at vesting? How large is your employer's share of your total wealth?
• Do you have share losses from previous years in the loss pot that a sale could be set against?
• Do more than twelve months over two calendar years lie between grant and booking? Is the application for the fifth rule worthwhile at all?
• Were there periods of residence or work abroad during the waiting period? Then the split under double tax treaties is a topic of its own.
• Is a direct investment with an IAB planned? In which year is the deduction worth more? Can the investment follow within three years?
• Is a birth coming up? A large receipt in the year before counts towards the income limit for parental allowance, see parental allowance and direct investment.

How we assess vesting years in the initial consultation

People who come to us with RSUs usually know their vesting schedule exactly, the tax bands of the coming years less often. We put both side by side: which year carries an IAB at which rate? Which project fits the investment deadline? How much equity does it require? The tax assessment of the plan itself, of the fifth rule and of any foreign element belongs with your tax adviser. This is exactly what we review in a no-obligation initial consultation, with your figures instead of the sample case. We make no return promises.