Ireland Update: Employment Share Schemes – Now is the time to act for employers/employees

In the most recent budget, Revenue announced that they are stepping up their efforts to fight non-compliance from employees, focusing their attention on employment share schemes. This targeted project is expected to yield additional Exchequer receipts to the tune of €80 million.

Each year, Revenue receives returns from employers who operate employment share schemes. These returns highlight which employees have participated in a share scheme and if they have exercised, assigned or released share options, and/or disposed of shares. Therefore, all participating employees will be on Revenue’s radar. 

With this in mind, here are a list of actions that every participating employee can take to ensure that they remain tax compliant after exercising their share options and subsequently holding/selling their shares:

1. Register for Relevant Tax on Share Options (“RTSO”)– RTSO is made up of Income Tax (IT), Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) and is payable within 30 days of exercising share options, along with the completion of RTSO1 Form. 

2. Register for Income Tax (“IT”)– An employee is considered a ‘chargeable person’ for the year in which they exercise, assign and/or release a share option. They are required to complete an Income Tax Return (Form 11).

For share options exercised in 2021, the Income Tax deadline is 16 November, 2022.

3. Declare dividend income– Dividends received from your shares are taxable, and the employee must declare this income to Revenue when filing their annual tax return.

4. Register for Capital Gains Tax– After selling their shares, the employee must report this disposal to Revenue, even if no tax is due, and complete and submit a Form CG1 by 31 October in the year after the date of disposal*. Where tax is due, the following dates for payment apply:

*Please note that Income Tax registered individuals can report their capital gains/losses via Form 11.

Penalties for non-compliance

In respect of RTSO, IT and CGT, a late payment will incur an interest charge, while a late return will incur a penalty.

Voluntary Disclosures

If an employee has received share options from their employer and has missed any of the aforementioned deadlines, a voluntary disclosure can be made to Revenue.

By ByrneWallace, Ireland, a Transatlantic Law International affiliated firm. 

For further information or for any assistance please contact ireland@transatlanticlaw.com.

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