Employment related shares

Overview

Employers may use company shares to reward, encourage and retain their employees. Shares may consist of share awards or share options.

Schemes can be approved or unapproved.

An employer needs Revenue approval to set up an approved scheme. There are two types of schemes approved by Revenue:

  • Approved Profit Sharing Schemes (APSS)
  • savings share option, or Save As You Earn (SAYE) schemes.

Any shares awarded or options granted under these approved schemes are exempt from Income Tax (IT). However, you must pay Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) on these. For more information on this please see Filing your tax return.

You must pay IT, USC and PRSI on shares or options granted under unapproved schemes. Capital Gains Tax (CGT) may also be due when you dispose of your shares.

Your employer may award you shares or grant you share options. They can award you these by either:

  • a 'formal' scheme with a written set of rules
  • an 'informal' once off basis.

Shares you receive from your employer are generally referred to as 'employment related shares' or 'share based income'. These are subject to IT, USC and PRSI. Your employer will make the necessary deductions from share awards through payroll and pay the tax directly to the Collector General.

Your employer may decide that the award of shares or share options will be subject to a 'vesting period'. This is the period between the date of the grant of shares and the date you meet the vesting conditions.

Next: Unapproved share schemes