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Taxation of employment related shares

  1. Overview
  2. Free and discounted shares
  3. Restricted Stock Units (RSUs)
  4. Restricted shares
  5. Forfeitable shares
  6. Convertible securities
  7. Employee Share Purchase Plans (ESPPs)
  8. Growth shares (hurdle or flowering 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 Tax, Universal 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.

  • Example 

    On 1 March 2023, Helen was awarded 1,000 shares at a cost to Helen of €500. The market value of the shares at the date of the award was €1,000.

    Under the terms of the share scheme plan, the shares are subject to forfeiture if Helen ceases employment before 28 February 2025.

    Helen’s tax on shares in March 2023
    DescriptionCalculationAmount

    Market value of shares

     

    €1,000

    Amount paid by Helen

     

    €500

    Discount amount added to pay

    €1,000 – €500

    €500

    Income Tax (40%)

     

    €200

    USC (8%)

     

    €40

    PRSI (4%)

     

    €20

    Total taxes

     

    €260

    Helen ceased employment with the company on 1 July 2024 and the shares were forfeited. The employer refunded Helen the €500 she paid for the shares.

    The tax that was charged on the shares when they were awarded is reduced to nil. Helen is entitled to a refund of €240 (Income Tax + USC).

    She must make a claim for a refund of the tax overpaid before 31 December 2028. Within four years from the end of the tax year in which the shares are forfeited.

Next: Convertible securities

Published: 01 November 2024 Print this page

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