Employment related shares

Unapproved share options

A share option is a right that your employer grants you to acquire shares in the company. The shares may be at no cost to you (nil option) or at a pre-determined price your employer sets. You must pay Income Tax (IT) on any gain you make on the exercise, assignment or release of a share option.

Capital Gains Tax (CGT) may also be due when you dispose of your shares.

There are two types of share options, a short option and a long option.

Short option

This option must be exercised within seven years from the date it is granted.

When you exercise a short option, you might pay IT on any gain you make. You will only pay IT if the option price is less than the market value of the shares at the grant date. The amount of the gain is the difference between:

  • the market value of the shares when you buy them
  • the amount you paid for the shares (plus any amount paid for the grant of the option).

Long option

When you exercise a ‘long option’, you may have to pay IT on the grant date and the date you exercise the option.

Grant date

You will only pay IT if the option price is less than the market value of the shares at the grant date. The tax is due on the difference between the:

  • market value of the shares on the grant date
  • amount you pay when you exercise the option.

Excise date

When you exercise the option, the tax is due on the difference between the:

  • market value of the shares on the date you exercise them
  • amount you paid for the shares.

Any tax you pay on the grant of the option will be offset against any tax due when you exercise the option.

Tax due

The tax due on the exercise of a share option is known as Relevant Tax on Share Options (RTSO).

You must calculate the Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) and include it with the amount of RTSO. Calculate:

  • IT at the higher rate.  (You can use the standard rate if your income from all sources for the year is chargeable at the standard rate. You must apply in writing to your Revenue office for approval to pay at the standard rate in advance.)
  • PRSI at the rate of the PRSI Class applied to you for the tax year.
  • USC at the highest rate.  (You can be chargeable at a lower rate of USC. You will have to obtain an advance approval.)

You must pay RTSO within 30 days of exercising the options. 

How to pay

You can make your payment using:

You must complete a RTSO1 Form when making your payment. Send the form to the Collector-General's Office.

You must also complete a Form 11 for every year that you exercise options.