On 10 July 2019, Michael is granted an option to acquire 1,000 shares at €3 per share. The terms under which the share option was granted confirm that it must be exercised before 5 May 2024 (a short option).
As it is a short option, no tax is due on the grant of the option.
On 1 March 2021, Michael instructed his employer to sell his shares. The market value of the shares at that date was €5 per share. He uses the sale proceeds to fund the option price and the tax liability on exercise.
Calculation of the taxable gain on excise of option
Description | Calculation | Value |
Market value of shares at 1 March 2021
|
1,000 x €5
|
€5,000
|
Amount paid by Michael (option price)
|
1,0000 x €3
|
€3,000
|
Exercise gain
|
€5,000 - €3,000 |
€2,000
|
Income Tax (40%)
|
|
€800
|
USC (8%) |
|
€160 |
PRSI (4%) |
|
€80 |
Total taxes |
|
€1,040 |
Michael must pay €1,040 to Revenue and file a RTSO1 form by 30 March 2021.
He must also file an Income Tax Return (Form 11) for the 2021 tax year. He must report the disposal of shares on his Form 11.