Taxation of employment related shares

Convertible securities

Your employer might award you a convertible security. A convertible security is a type of share or stock that can be converted into, or exchanged for, another type of share or stock. Securities are widely defined and can, for example, include:

  • shares
  • bonds
  • debentures
  • loan notes
  • and
  • options.

Taxation on the acquisition of convertible securities

You must pay Income Tax, Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) on the acquisition of a convertible security. The amount you are taxed on depends on whether or not the convertible security is treated as a:

The right to convert the security is ignored when computing the charge to tax at the date you receive it.

If the convertible security is a share option and you exercised it before 1 January 2024 you must pay any tax to Revenue directly yourself.

If the convertible security is a share option exercised on or after 1 January 2024, your employer will deduct Income Tax through payroll. Information about how to report share options is available in Unapproved share option schemes.

If the security is not a share option, your employer will make the necessary deductions through payroll and pay the tax directly to the Collector-General.

Taxation on the occurrence of a 'chargeable event'

A gain may arise when a chargeable event occurs. You must pay Income Tax, USC and PRSI on this gain.

You are considered a 'chargeable person' in the year in which the chargeable event occurs. You must file an Income Tax Return for that year.

There are four types of chargeable events which may occur:

  1. The conversion of your convertible securities.
  2. The release of your entitlement to convert for consideration.
  3. The disposal of your securities while they are still convertible.
  4. The receipt of a benefit connected to your entitlement to convert.

Capital Gains Tax (CGT)

If you dispose of your securities, you may be liable to CGT. You must report this disposal to Revenue, even if no tax is due. Your employer will not deduct any tax or report the disposal for you.

The amount you were chargeable to tax on is added to the cost of acquisition of the securities when calculating your chargeable gain.

Next: Employee Share Purchase Plans (ESPPs)