Share Based Remuneration
Budget 2025
Key measures
The report arising from the Department of Finance consultation in relation to share-based remuneration has been published and contains a number of recommendations which the Minister for Finance said he will consider in due course.
Our view
The Department of Finance issued a public consultation on Ireland’s Taxation of Share-based Remuneration in December 2023 with responses required by 22nd January 2024. They stated that: “The aim of this public consultation is to gain an in-depth understanding of industry and stakeholder views on the share scheme environment in Ireland; including whether the administration of, and legislation governing, share-based remuneration schemes meet the current requirements of Irish businesses, their employees and the wider economy.”
The report, prepared by Indecon, was published today and the Minister outlined that he will consider the recommendations in due course.
The first recommendation is to introduce a cap on the level of employer PRSI exemption with the suggestion being this should be a per-employer cap applying to all new applications. The cost to the Exchequer of the Employer PRSI exemption is, in our view, compensated for through growth in companies by incentivisation of employees so as to attract and retain talent in Ireland leading to increased taxes through corporation tax, PAYE and Indirect taxes.
Indecon acknowledge in their key findings that there are attractive tax advantaged schemes for small enterprises in many important competitor countries. However, the report does not include any recommendations for the introduction of any such tax advantaged plans to increase Ireland’s competitiveness other than recommendations regarding the improvement of the Key Employee Engagement Program (KEEP) scheme.
A welcome recommendation which we sought on our response to the consultation is the reduction in the specified rate for calculating benefit in kind on loans to acquire shares. It is recommended that the current rate of 13.5% is out of kilter with the rates typically applied globally including in other EU countries. The report recommends that this is reduced to a rate that aligns with the market prevailing interest rate for non-financial corporations.
A further recommendation is for Restricted Stock Units (RSUs) to be taxed in Ireland on a sourcing basis similar to share options. Currently they are taxed on an all-in or all-out basis with the full amount typically being taxed if you are resident in Ireland at the date of vesting. There are pros and cons to the current approach and some employers find it confusing as the approach for RSUs differs to share options. However, any change to the treatment of RSUs should have a long lead in time with clear guidance issued in advance of the effective date of the change.
