On 22 February 2021, Gerry was awarded 100 Ordinary-A shares free of charge, by his employer. The Ordinary-A shares are convertible into 100 Ordinary-B shares in three years.
The market value of the Ordinary-A shares at the date of acquisition, ignoring the right of conversion, is €1,000.
Gerry’s employer adds the amount chargeable to his pay, and Income Tax, USC and PRSI are applied. Gerry earns €90,000 each year, so he is liable to the higher rates of Income Tax and USC.
Gerry’s tax on acquisition of convertible shares
Description | Amount |
Market value of shares (ignoring right of conversion)
|
€1,000
|
Consideration paid by Gerry
|
€0
|
Amount chargeable
|
€1,000
|
Income Tax (40%)
|
€400
|
USC (8%)
|
€80
|
PRSI (4%)
|
€40
|
Total taxes
|
€520
|
On 22 February 2024, on conversion, Gerry received 100 Ordinary-B shares for a consideration of €100. The market value of the Ordinary-B shares on 22 February 2024 was €3,000.
The market value of the Ordinary-A shares on 22 February 2024, ignoring the right of conversion, was €1,100.
Gerry’s tax on conversion of convertible shares
Description | Amount |
Market value of Ordinary-B shares
|
€3,000
|
Deduct market value of Ordinary-A shares (ignoring the right of conversion)
|
€1,100
|
Deduct consideration paid by Gerry
|
€100
|
Amount chargeable
|
€1,800
|
Income Tax (40%)
|
€720
|
USC (8%)
|
€144
|
PRSI (4%)
|
€72
|
Total taxes
|
€936
|