HOW DOES IT WORK? Free shares can be granted either as a once-off or as part of a formal plan. Whichever approach is followed, these shares are regarded as a benefit-in-kind by Revenue, with the value of that benefit being the market value of the shares at the point that they come into the possession of the employee – whether the shares are handed over immediately or after a vesting period. Discounted shares can also be offered to employees at the discretion of the employer. The discount – as you might imagine – is the difference between the amount an individual pays for the shares and their market value at the time of the transaction. Income tax, USC and PRSI comes into play in both scenarios. In the case of free shares, the tax liability is assessed based on the market value of the shares at the time you receive them, whereas for discounted shares you are taxed on the value of the discount. Share awards can be facilitated through different plans, so no single procedure or set of rules will apply. When companies opt for a Restricted Stock
Unit (RSU) plan, they are consciously moving away from options and to awards. With an RSU, employees are not asked to exercise anything, instead they simply receive shares after meeting whatever performance-related criteria was agreed upon or when an agreed period of time has elapsed. When an employee enters into this arrangement, they will generally receive a certificate of entitlement and will consent to the vesting period. If a company uses a platform such as Global Shares, we do this part online, so the certificate of entitlement does not apply. We also do grant acceptance online, thus removing manual processes and paperwork. There is no tax liability at the grant date, but income tax, PRSI and USC charges all become due at the moment of vesting, with the income tax calculated based on the market value of the shares at that time. Then, if the shares are sold on, the employee will be liable for CGT (Capital Gains Tax).
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