Section 10 Finance Bill 2017
- Department of Finance public consultation 2016
- Tax efficient share option scheme for employees and directors in SME sector
- Income tax, PRSI and USC exemption on share option gain on exercise of qualifying share options
- CGT treatment on disposal - base cost exercise price
- Share options granted in the period from 1 January 2018 to 31 December 2023
Qualifying Share Options
- New ordinarily fully paid up shares in qualifying company
- No preferential current or future rights to dividends, asset on winding up or redemption
- Option price at date of grant cannot be less than market value of shares on that date
- Written contract setting out number and type of shares, option price, exercise period
- Options cannot be exercised within 12 months of grant other than in limited circumstances
- Option cannot be exercised more than 10 years after date of grant
- Options granted for bona fide commercial purposes
Qualifying Company
- Ireland / EEA incorporated and Irish resident or carrying on a business in Ireland through a branch or agency (Committee Stage Amendment)
- Must be carrying on trading activities other than excluded activities such as:
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- Professional services,
- Financial activities
- Dealing in and developing land, building and construction,
- Forestry,
- Coal, steel and shipbuilding
- Adventures or concerns in the nature of a trade
Qualifying Company
At the date of grant of the option
- The company must be an SME:
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- Less than 250 employees,
- less than €50m turnover, and / or
- less than €43m balance sheet
- Total market value of issued but unexercised qualifying options must be less than€3m
Qualifying Company
Throughout the relevant period (i.e., date of grant to date of exercise):
- The company must be unquoted, other than Irish Enterprise Securities Market (ESM) or its equivalent in EEA / DTA country - Committee Stage Amendment
- It cannot be a company in difficulty under EU State aid rules
Holding Companies
- Business must consist wholly of holding shares in a qualifying company
- Shares in subsidiary must be directly held
- 100% issued share capital ownership condition
Qualifying Individuals
Throughout the relevant period (i.e. date of grant to date of exercise):
- Must be a fulltime employee / director
- At least 30 hours per week
- Office / employment capable of lasting more than 12 months
- Working time conditions satisfied if share options exercised within 90 days of leaving office / employment of the qualifying company
- Cease to be qualifying individual if, together with connected parties, directly or indirectly becomes beneficial owner of more than 15% of the ordinary share capital during option period
Qualifying Individuals
Limits on the relief per individual
- Market value of all shares in respect of which qualifying share options have been granted by the qualifying company to an employee or director cannot exceed:
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- €100,00 in any one tax year,
- €250,000 in any three consecutive tax years, or
- 50% of the annual emoluments of the qualifying individual in the year of assessment in which the qualifying share option is granted.
- Limits the scope of the relief where the individuals in question earn a relatively low salary in a company with high-growth potential
- Valuation date not explicit in legislation – Revenue Guidance to confirm if date of grant
Other Provisions
- If relief claimed under KEEP cannot claim EIIS relief on cost of acquiring shares (Committee Stage amendment)
- Reporting requirements for qualifying company by 31 March of following tax year – disqualifies company if not complied with
- Ministerial Order required for Commencement
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
