Taxation of employment related shares

Forfeitable shares

Your employer may award you shares subject to the condition that you will forfeit the shares if certain circumstances arise or do not arise. For example, if you leave the company or fail to meet expected performance conditions.

Taxation of forfeitable shares

You must pay Income TaxUniversal Social Charge (USC) and Pay Related Social Insurance (PRSI) on the:

  • market value, if the shares awarded are free shares
  • or
  • discount value, if the shares awarded are discounted shares.

You will be charged tax on the date the shares are awarded even though they may be forfeited. Your employer will make the necessary deductions through payroll and pay the tax directly to the Collector-General.

Tax refund on the forfeiture of the shares

If the shares are forfeited, any tax charged when they were granted will be reduced to nil. Revenue will repay you any Income Tax and USC you paid when the shares were awarded.

How to claim

You must submit a written claim for repayment:

You must do this within four years from the end of the tax year in which the shares are forfeited.

Capital Gains Tax (CGT)

When you forfeit shares, it is treated as a disposal for CGT purposes. The allowable loss is restricted to the amount you paid for the shares less any amount you receive on the forfeiture.

Next: Convertible securities