Unapproved share option schemes
How to calculate and pay Relevant Tax on Share Options
Note
If you realised a gain on a share option prior to 1 January 2024, you must pay Relevant Tax on Share Options (RTSO) within 30 days of exercise.
If you realise a gain on a share option on or after 1 January 2024, your employer is responsible for remitting the tax to Revenue via payroll.
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
- and
- the amount you paid for the shares, plus the amount paid on the grant of the option, if any.
- Example
On 6 May 2022, 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 2023. The market value at date of exercise was €5.00 per share.
Gain calculation:
| Description |
Calculation |
Total |
| Market value at date of exercise |
500 x €5 |
€2,500 |
| Less option price paid |
500 x €2 |
(€1,000) |
| Income gain |
€2,500-€1,000 |
€1,500 |
Step 2: Calculate Relevant Tax on Share Options
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).
Rate of tax prior to 1 January 2024
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.
- Example
In the example above, Thomas’ income gain was €1,500 and he now needs to calculate the RTSO due.
Calculation of RTSO
| Tax |
Rate |
Calculation |
Total |
| Income Tax |
40% |
€1,500 x 40% |
€600 |
| USC |
8% |
€1,500 x 8% |
€120 |
| PRSI |
4% |
€1,500 x 4% |
€60 |
| RTSO due |
|
|
€780 |
Thomas' RTSO liability is €780. He needs to pay the RTSO by 8 June 2023.
Your income from all sources for the year might be chargeable at the standard rate (20%). For years of assessment prior to 2024, you could contact Revenue and apply for approval to pay:
- Income Tax at the standard rate of tax
- and
- a lower rate of USC.
Note
This approval had to be obtained in advance of paying RTSO to the Collector-General. Otherwise, the higher rate of tax applied.
Rate of tax on or after 1 January 2024
Your employer will calculate the gain as per Step 1. They will use the rate of tax applicable as per your current Revenue Payroll Notification (RPN).
Step 3: When to pay RTSO
If you realised a gain prior to 1 January 2024, you must pay RTSO within 30 days of exercising the options. The 30 day period includes the exercise date.
If you realised a gain on or after 1 January 2024, your employer must submit the tax real-time via payroll.
Note
From 1 January 2023 to 31 December 2023, late payment of RTSO is subject to an Income Tax interest rate of 0.0219%. Prior to 1 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, please refer to Manage your tax registrations.
If you are already registered for RTSO, you can make your payment using the payments facility in:
If you realise a gain on or after 1 January 2024, you do not need to register for RTSO. Your employer will submit the tax to Revenue through payroll.
Step 5: Complete RTSO1 Form
For gains realised prior to 1 January 2024, you must complete a RTSO1 Form when making your payment and send it to the Collector-General's Office.
If you realise a gain on or after 1 January 2024, you do not have to submit a RTSO1 Form.
Step 6: File your Income Tax Return
If you realised a gain prior to 1 January 2024, 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.
If you realised a gain during 2023, you still need to file an Income Tax return by 31 October 2024.
If you realise a gain on or after 1 January 2024, you are not obliged to file an Income Tax return for this event.
For any year of assessment, you must file an Income Tax Return if you:
- receive any dividends from your shareholding
- or
- dispose of shares, including disposals in a sell-to-buy arrangement or cashless exercise.
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