More and more employees now receive part of their remuneration in the form of company shares and/or options and/or RSUs. But many are given less than adequate advice on the taxation of these benefits and their Revenue reporting and paying responsibilities. Here’s a short description and simplified tax guide for the most common schemes.
Employee Share Purchase Plan
Here the employer allows employees to buy company shares at a discount (usually) to the lower of the share price on either the first or last day of a six month offer period. Value of discount = subject to Income Tax. Gains on sale = subject to Capital Gains Tax.
Save As You Earn Scheme
In this case employees save a portion of after tax salary for a period of years, at which point they have the option to purchase shares in the company (or take back their savings if the option purchase price is greater than the market price). Value of option = exempt from Income Tax. Gains on sale = subject to Capital Gains Tax.
Approved Profit Sharing Scheme
All employees have the right to invest a percentage of salary in company shares, which are then held in a trust for a minimum three year period. Value of salary purchased shares = exempt from Income Tax up to annual €12,700 limit but USC and PRSI applies. Gains on sale = subject to Capital Gains Tax.
Free or Discounted Shares
This is where employers simply award company shares for free or at a discounted price, sometimes subject to a vesting period. Value of shares awarded = subject to Income Tax. Gains on sale = subject to Capital Gains Tax.
Share Option Scheme
The employer grants employees the right to buy a set number of company shares, at a pre-determined option price, which can be exercised at a pre-set future period. Value of award (market share price at date of exercise less option exercise price) = subject to Income Tax. Gains on sale (sale price less market share price at date of exercise) = subject to Capital Gains Tax.
Restricted Stock Units
RSUs refer to where a company promises (or grants) an employee a pre-set number of shares (or their cash equivalent) on completion of a vesting period (which may complete in reference to time and/or individual performance and/or company performance). Value of award (market value or cash value at date of vesting) = subject to Income Tax, USC and PRSI. Gains on sale (sale price less market price at date of vesting) = subject to Capital Gains Tax.
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