Share Option Changes in 2024: Essential Information for Employers

Gallagher keane (8)
Business / Tax

Share Option Changes in 2024: Essential Information for Employers

From 1 January 2024, employers will be required to withhold Irish payroll taxes from gains arising on the exercise of share options. This will be a significant change, as up to now, the onus was on employees (and directors) to pay the “Relevant Tax on Share Options” (RTSO) through self-assessment to the Irish Revenue within 30 days of the date of exercise. The employees also had to submit Form RTSO1 to the Irish Revenue within the same timeframe.

What Employers Should Consider:

  1. Enhanced Reporting Requirement (ERR): With the new ERR effective from January 1, 2024, employers face an additional reporting burden. Understanding and complying with this requirement will be essential to avoid penalties.

  2. Careful Management of Payroll Tax Withholding: Employers will need to carefully administer payroll tax withholding. Considerations such as ‘sell to cover’ arrangements should be planned, and effective communication with employees regarding share option exercises will be crucial.

  3. Funding Tax Liabilities: Employers should strategize how tax liabilities will be funded, considering potential delays between the exercise of options and the issuance of shares.
  4. International Considerations: If employees who worked in Ireland between the grant and vesting of share options have since left the country, Irish tax liabilities may still apply on option exercise. Employers must navigate payroll tax withholding in such cases.

  5. Form Submission Requirements: Employers are reminded to submit Form RSS1 for 2023 to Revenue by March 31, 2024, detailing share options granted, exercised, transferred, assigned, or released during 2023.

In preparation for these changes, employers are encouraged to seek professional advice and proactively address these considerations to ensure compliance and effective management of share option-related tax obligations.

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