WHAT ARE THE KEY RULES?
This is not an all-employee scheme. So, companies can choose which employees they want to include in any such plan.
Less generous than approved schemes on tax, with employees liable for income tax, PRSI, USC, and CGT at various points along the line. Prior Revenue approval is not required, but the company must complete a return of information (Form RSS1) annually by March 31 following the end of the relevant tax year in which the restricted shares were awarded, and details must also be included in their Corporation Tax returns (CT1). Under self-assessment provisions, the employee must give details on the exercise of options, the gain on the option, and any subsequent disposal in their annual tax return. WHAT ARE THE ADVANTAGES FOR THE COMPANY? The employer can choose which employees will be offered options. This means a company can focus on key executives who, once granted an ownership stake, will have an explicit stake staying with the company and actively contributing to its long-term success.
Employers make no PRSI contribution.
WHAT TYPE OF COMPANY DOES THIS SCHEME BEST SUIT? All companies can look to implement an unapproved scheme, but, as mentioned previously, private companies need to address issues around share valuation and having a market for those shares before proceeding. Unapproved schemes are the most popular plan choice for startup companies in Ireland as they want flexibility. As well as this, unapproved schemes are more cost efficient to establish and so for a startup, this can be a big factor.
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