Unapproved share option schemes
How to calculate and pay Relevant Tax on Share Options
You must pay Relevant Tax on Share Options (RTSO) within 30 days of exercising share options.
Step 1: Calculate your gain
The gain is the difference between:
- the market value of the shares when you exercise the option, or the amount received for its assignment or release
- the amount you paid for the shares (plus amount paid on the grant of the option, if any).
On 06 May 2020, Thomas was granted 500 share options by his employer. The exercise price was €2 per share, which was the market value at date of grant. He exercised his share options on 10 May 2021. The market value at date of exercise was €5.00 per share.
|Market value at date of exercise
||500 x €5
|Less option price paid
||500 x €2
Step 2: Calculate Relevant Tax on Share Options
Rate of tax
The Income Tax and Universal Social Charge (USC) due on the exercise of a share option is known as Relevant Tax on Share Options (RTSO).
You must calculate Income Tax and USC at the higher rate. You must also calculate Pay Related Social Insurance (PRSI) using the rate of the PRSI class applied to you for the tax year.
In the example above, Thomas’s income gain was €1,500 and he now needs to calculate the RTSO due.
Calculation of RTSO
||€1,500 x 40%
||€1,500 x 8%
||€1,500 x 4%
Thomas' RTSO liability is €780. He needs to pay the RTSO by 8 June 2021.
Paying at the lower tax rate
Your income from all sources for the year might be chargeable at the standard rate (20%). If it is, you may apply for approval to pay:
- Income Tax at the standard rate of tax
- a lower rate of USC.
You can apply for approval:
This approval must be obtained in advance of paying RTSO to the Collector-General. Otherwise, you must pay tax at the higher rate.
Step 3: When to pay RTSO
You must pay RTSO within 30 days of exercising the options. The 30 day period includes the exercise date.
From 01 January 2023, late payment of RTSO is subject to an Income Tax interest rate of 0.0219%. Prior to 01 January 2023, the interest rate was 0.0322%. Interest is charged for each day, or part thereof, from the date when the payment is due until the date the payment is made.
Step 4: How to pay RTSO
If you have never been registered for RTSO, refer to Manage your tax registrations.
If you are already registered for RTSO, you can make your payment using the payments facility in:
Step 5: Complete RTSO1 Form
You must complete a RTSO1 Form when making your payment and send it to the Collector-General's Office.
Step 6: File your Income Tax Return
You must also complete an Income Tax Return (Form 11) under self-assessment for every year that you exercise, assign or release a share option.
You must include details of any dividends received from your shareholding.
If you dispose of shares, you may be liable to Capital Gains Tax (CGT).
How to correct an underpayment of RTSO
If you notice an error in your calculation of RTSO, or you have not reported all income or gains for a previous year, you must tell Revenue.
For further information on how to make a disclosure on RTSO, please see Making a disclosure.
Next: Disposal of share options