Employers operating share schemes, as well as trustees of some approved share schemes, are reminded that they must satisfy their reporting obligations by March 31, 2022, for the year 2021.

You must report this income to the Revenue Commissioners, regardless of the amount or kind of tax you pay.

We assist people all around Ireland with completing their income tax returns and lowering their tax burden.

The return to be filed is dependent on the type of share scheme, which is summarised below for convenience.

Paying Tax on Company Shares

Employees may find the tax regulations governing income from share schemes, stock options, and dividends to be complex and intimidating.

In certain circumstances, the employee is responsible for tax liabilities, while in others, the employer is responsible for tax liabilities. Whether or not you must pay tax on this income is determined by the sort of share scheme used by your employer.

Our professional accountants have compiled some information to assist you in understanding some of the more typical employment-related stock plans and how they effect your tax liability.

Share Options (Unapproved Scheme)

A Share Option is the right to purchase business shares at a certain price. When the employee exercises the share option, any tax due must be paid to the Revenue Commissioners within 30 days of exercising the option, and the employee must submit Form RTSO1 with payment.

If you do not sell the shares right away, you may be subject to Capital Gains Tax (CGT) in addition to the Relevant Tax on Share Option (RTSO).

Restricted Stock Units (RSUs)

Your employer gives you a Restricted Stock Unit (RSU), which is a share of the company. You will receive shares in the firm or the cash equivalent upon completion of the maturation term, which is the agreed-upon period during which you must be engaged in the company in order to hold these shares. These types of shares are subject to income tax, the Universal Social Charge (USC), and Pay Related Social Insurance (PRSI), which are all processed through your employer's PAYE system.

If you decide to sell your RSU, CGT may be held accountable. However, it is the employee's responsibility to notify the Revenue Commissioners and pay any CGT owed.

Save As You Earn (SAYE) Schemes

This approved savings-related share option scheme operates by giving employees the chance to acquire shares at a reduced price using money they've saved.

Employees who exercise their option to acquire shares at the end of the savings period will be exempt from paying income tax on any gains made on these shares. You must, however, pay USC and PRSI. If you decide to sell the shares you got through the SAYE plan, you may be subject to CGT.

Approved Profit-Sharing Schemes (APSS)

Your company can give you tax-free shares up to a maximum of €12,700 each year under this scheme. The shares must be held in a trust for the period of retention set up by your employer in order for this income to be tax-free.

Although this arrangement exempts you from paying income tax, you must pay USC and PRSI on the value of the shares.

Dividends Explained

The term "dividend" refers to the portion of a company's profits distributed to shareholders.

Dividend Withholding Tax (DWT) is paid at the source, meaning before the dividend is issued to you as a shareholder. DWT is currently charged at 20%. Any profits you earn, however, must be reported to the Revenue Commissioners on your tax return.

Still have more questions about paying tax on employment-related shares?