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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)

Free and discounted shares

Your employer may give you shares free of charge or the opportunity to buy shares at a discounted price.

Free shares

Shares your employer gives you free of charge are a taxable benefit. The value of the benefit is the market value of the shares at the date of the award.

Your employer may decide that the award of the shares will be subject to a ‘vesting period’. If so, the value of the benefit is the market value of the shares at the date of vesting.

A vesting period is the period between the date of the grant (or promise) of the shares and the vesting date. The vesting date is the date on which the vesting condition is satisfied. Vesting periods are usually satisfied by:

  • the passage of a stated period of time
  • your individual performance
  • the achievement of corporate goals.

Taxation of free shares

You must pay Income Tax, Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) on the value of the benefit.

The payment is made when you are awarded the shares. Your employer will make the necessary deductions through payroll and pay the correct amount directly to the Collector-General.

  • Example 1

    In June 2021 Jean received 500 free shares, valued at €5 per share, from her employer.

    When Jean was awarded the shares the market value of all 500 shares was €2,500. Her employer added €2,500 to her pay for the pay period in June 2021 and Income Tax, USC and PRSI was applied.

    Jean sold all the shares in September 2023 for €4,000 (€8 per share). She made a chargeable gain of €1,500 (€4,000-€2,500). She is liable to CGT on this gain.

Discounted shares

Shares your employer gives you the opportunity to buy at a discounted price are a taxable benefit.

Taxation of discounted shares

You must pay Income Tax, USC and PRSI on the discount amount. The discount is the difference between the:

  • market value of the shares at the date of the award
  • and
  • amount you pay for them.

The payment is made when you are awarded the shares. Your employer will make the necessary deductions through payroll and pay the tax directly to the Collector-General.

  • Example 2

    In June 2021 Steven was awarded 500 shares at the discounted price of €3 per share from his employer. The market value of the shares at that time was €5 per share.

    Steven’s employer added the discount amount to his pay for the pay period in July 2021. Steven’s salary for the year is €30,000, so he is liable to the lower rates of Income Tax and USC.

    Steven’s tax on shares
    DescriptionCalculationAmount

    Market value of shares

    €5 x 500

    €2,500

    Amount paid by Steven

    €3 x 500

    €1,500

    Discount amount added to pay

    €2,500 – €1,500

    €1,000

    Income Tax (20%)

    		  

    €200

    USC (4.5%)

    		  

    €45

    PRSI (4%)

    		  

    €40

    Total taxes

    		  

    €285

    Steven sold all the shares in September 2023 for €4,000 (€8 per share). He made a chargeable gain of €1,500 (€4,000-€2,500). He is liable to CGT on this gain.

Capital Gains Tax (CGT)

If you dispose of your shares, 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.

Next: Restricted Stock Units (RSUs)

Published: 25 January 2024 Print this page

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