Shares for employees
Unapproved share options
Note
Employers are obliged to operate Pay As You Earn (PAYE) on gains realised when their employees or directors exercise, assign or release share options on, or after, 1 January 2024.
A share option is a right granted to an employee to acquire shares in a company. You can decide to issue the shares at no cost to the employee, or you can set a predetermined purchase price.
Any gain an employee makes on the exercise, assignment, or release of a share option is subject to:
Grant of share options
An option that must be exercised within seven years is known as a short option. There is no tax due on the date that this right is granted.
An option that can be exercised more than seven years from the date it is granted is known as a long option. Tax is due on the date of the grant if the option price is less than the market value of the shares. You are responsible for submitting this tax through payroll.
Your employee is entitled to a credit for the tax paid on the grant if they realise a gain on the exercise of a long option. You must provide this credit by re-grossing the net amount of tax due on the date of the exercise.
- Example
Orlaith received a long option, and tax of €260 was collected and paid by the employer via payroll on the date of the grant. In January 2025, she exercised the long option and realised a gain of €3,000. Her employer calculates the tax due at the relevant rates as per her most recent Revenue Payroll Notification (RPN) and deducts the tax paid on the grant. The net tax payable is regrossed and included as part of Orlaith’s gross pay for the relevant payroll submission.
Orlaith's exercise gain calculation
| Gain on exercise |
|
|
€3,000 |
| Income Tax |
40% |
€1,200 |
|
| USC |
8% |
€240 |
|
| EE PRSI |
4.1% |
€123 |
|
| Tax on gain on exercise |
|
|
€1,563 |
| Less tax paid on date of grant |
|
|
€260 |
| Tax payable on date of exercise |
|
|
€1,303 |
| Re-grossed Tax €1,303 x 100/(40+8+4.1) |
|
|
€2,501 |
| Payroll submission - Gross Pay in respect of the gain realised on exercise |
|
|
€2,501 |
Exercise of share options prior to 1 January 2024
The employee was a chargeable person and had pay Relevant Tax on a Share Option (RTSO) within 30 days of the exercise. Your employee’s obligations are outlined in Employment related shares.
Share options exercised prior to 1 January 2024 are not taxed through the PAYE system.
Exercise of share options on, or after, 1 January 2024
Share options exercised on, or after, 1 January 2024 are taxed through the PAYE system. Your employee is no longer a chargeable person. You must deduct Income Tax, USC and PRSI through payroll on any gain arising from the exercise of share options. Employer PRSI is not due on share option gains, subject to certain conditions.
Assignment or release of share options on, or after, 1 January 2024
You must deduct Income Tax, USC and PRSI through payroll if your employee realises a gain by assigning or releasing a share option.
If you make a cash payment to your employee to release a share option, then you must operate PAYE (including Employer PRSI) in the normal manner.
Reporting requirements
You must report the grant, exercise, assignment or release of an option on Form RSS1.
For further information, please see Share reporting obligations.
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