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Ireland Consults On Taxation Of Employee Share Schemes

by Jason Gorringe,, London

23 May 2016

The Irish Government has launched a consultation on the tax treatment of share-based remuneration.

The Programme for Partnership Government published by the new minority Fine Gael administration includes a commitment to "explore the mechanisms through which SMEs can reward key employees with share options in a tax-efficient manner."

Under the current system, there are three Revenue-approved share schemes, Approved Profit Sharing Schemes (APSS), Savings Related Share Option Schemes (SAYE), and Employee Share Ownership Trusts (ESOT). Generally, they allow the value of the benefit received by an employee to be taxed as a capital gain when the shares are disposed of, rather than as taxable income when the option is granted or shares acquired.

The consultation will inform a review of the existing Revenue-approved share schemes and the tax treatment of other forms of share-based remuneration, to determine if the system is fit for purpose in the current economic environment. The Government will consider whether a policy rationale exists to introduce new reliefs to incentivize the use of share-based remuneration in Irish companies.

Finance Minister Michael Noonan said: "International research has shown that when employees share in the profits of the company this can be effective in fostering partnership, increasing competitiveness, and in helping companies to attract and retain staff in a competitive international labor market. This can then support employment and economic growth."

"Now is a good time to review the tax treatment of share based remuneration, including consideration of whether existing supports can be targeted more effectively. I encourage all interested parties to make a submission and participate in this important area of policy."

The consultation closes on July 1.

TAGS: tax | business | Ireland | tax incentives | share schemes | employees | tax authority | small and medium-sized enterprises (SME) | tax breaks | individual income tax

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