Services to Irish-based Companies

Tax Tips April 2018

Employee share options

  • A share option is a benefit in the form of an option given by a company to an employee or director to acquire a share in the company at a pre-determined price.The Budget 2018 sees the introduction of a new employee share incentive scheme to be known as the Key Employee Engagement Programme (“KEEP“) to help small and medium enterprises attract and retain key personnel.

    Under the KEEP regime, there is no tax charge when the share options are exercised. A CGT liability will arise when the shares are actually disposed of.

    The new scheme will apply to qualifying share options granted between 1 January 2018 and 31
    December 2023. The conditions to be satisfied are as follows:

    1. the shares under option must be ordinary shares, which carry no preferential rights to dividends;
    2. the option exercise price cannot be less than the market value of the shares on the date of option grant;
    3. the shares under option are subject to financial thresholds. An employee’s shares under option cannot exceed €100,000 in any one year, or €250,000 in any three consecutive years, or 50% of the annual pay of the individual. The total value of shares under option cannot exceed €3 million;
    4. the options cannot generally be exercised within 12 months of grant;
    5. the company must be an unquoted company, although entities listed on emerging companies markets (such as the ESM in Ireland) can benefit from this programme. The company must also be a small or medium enterprise; and
    6. the company must carry on trading activities which are taxable in Ireland. Activities such as construction, professional services and land dealing are not able to access the KEEP regime.