Do I pay tax on share options at work ?
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 (the option price).
You must pay on any gain you make on the exercise, assignment or release of a share option:
Taxation on grant date ( if a short option less than 7 yrs )
There is no tax due on the date that the right is granted. Your employer will report details to Revenue of the options granted to you.
Taxation on exercise date (i.e. when you get a chance to sell the shares )
When you exercise an option, you must pay Income Tax, Universal Social Charge (USC) and Pay Related Social Insurance (PRSI).
The Income Tax and USC due on the exercise of a share option is known as Relevant Tax on Share Options (RTSO). The amount of the gain is the difference between:
- the market value of the shares on the date you exercise the option
- and
- the amount you paid for the shares (plus any amount paid for the grant of the option).
You must pay RTSO within 30 days of exercising the option and complete a RTSO1 form. The 30 day period is inclusive of the exercise date.
You must also file an Income Tax Return (Form 11) for the year you exercise the option. You should include details of the RTSO already paid in the relevant section of the form. Your employer will also report details to Revenue of any options exercised by you.
Capital Gains Tax
If you hold on to the shares after date of exercise and then sell them later at a price greater than the price at the exercise date then you may have to pay Capital gains tax at 33% on the said gain.
Any queries on the above give me a call on 091 763817 or email me at oliver@taxreturnhelp.ie