Unapproved share options – Tax treatment
A share option is a right that your employer grants you to acquire shares in the company.
The shares may be at no cost to you (nil option) or at a pre-determined price your employer sets. You must pay Income Tax (IT) on any gain you make on the exercise, assignment or release of a share option.
If the option is a long option for over 7 years, then you may have to pay tax as well on date of grant.
Capital Gains Tax (CGT) may also be due when you dispose of your shares.
The tax due on the exercise of a share option is known as Relevant Tax on Share Options (RTSO).
You must calculate the Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) and include it with the amount of RTSO. Calculate:
- IT at the higher rate. (You can use the standard rate if your income from all sources for the year is chargeable at the standard rate. You must apply in writing to your Revenue office for approval to pay at the standard rate in advance.)
- PRSI at the rate of the PRSI Class applied to you for the tax year.
- USC at the highest rate. (You can be chargeable at a lower rate of USC. You will have to obtain an advance approval.)
You must pay RTSO within 30 days of exercising the options.
Any queries on the above give me a call on 091 763817 or email me at oliver@taxreturnhelp.ie