The Department of Finance (the Department) has published the Tax Strategy Group's Paper on Taxation of Share Based Remuneration (the Paper), which outlines potential developments in the taxation of share-based remuneration.
The Tax Strategy Group is not a decision making body and its papers highlight issues and options for consideration in the budgetary process.
The publication of the Paper follows on from recent developments:
The Paper outlines some factors which have had a negative impact on the tax efficiency of share-based remuneration, including the application of employee PRSI and USC on share-based remuneration and the recent abolition of various tax reliefs.
The Paper recognises the advantages of employee financial participation and the growing trend in some sectors towards the use of share based remuneration. However, the Paper indicates that consideration must be given as to whether share based remuneration tax supports are an appropriate use of fiscal resources.
The Paper highlights the main themes raised in the Consultation Process:
The Paper identifies possible changes to the tax treatment of share based remuneration:
The Paper notes that any changes to the current tax regime on share based remuneration must be considered in the context of the EU state aid legislation. Furthermore, the Paper indicates that given the limited fiscal space available for tax measures consideration might be given as to whether existing Revenue approved schemes ought to continue and whether the employer PRSI exemption should be retained.
Submissions on the Consultation Process by various interested parties highlighted the significant disadvantages of the current tax regime and outlined comprehensive recommendations to improve the tax efficiency of share based remuneration.
We should find out whether the Government proposes to take any action in this area when the Minister for Finance gives his statement on Budget 2017, which is likely to be in October.
The introduction of a more tax efficient share-based remuneration regime would be greatly welcomed and it would be a strong signal that Ireland intends to remain a competitive economy after the recent Brexit vote.
If you are interested in obtaining more information about share incentives generally please contact Gillian Dully at firstname.lastname@example.org.
Gillian is an Associate Solicitor at LK Shields Solicitors and is a member of the IPSA Council. She has considerable experience in the structuring of share incentive schemes and the treatment of share options and other employee benefits in mergers and acquisitions.