Taxation on shares

S

sarahot

Guest
When I started working for my company, as part of my contract I was giving an amount of shares...company is an american company with a plant setup here in Irl...I have been there for two years and although the company was a startup company, they have done well and got bought out last year by another american company...because of this buyout, my shares are to be vested to the new company...this is fine as the shares have risen well in value...

My question is what taxation are my shares to be taxed at?...rumours here are we might have to pay more than the 20% that is normal for CGT...
 
Unless the share scheme is approved and benefits from preferential tax treatment...

If you are granted shares at a discount to the market value then you are liable for income tax at your marginal rate on the discount once you exercise (acquire) them and payable within 30 days via and [broken link removed].

One you exercise share options and have discharged your income tax liability any capital gain arising from their eventual resale is assessable for CGT with the normal treatment (e.g. including offsetting previously incurred losses, annual CGT allowance etc.) applying.
 
Hi Clubman,

After your reply yesterday, i re-checked the situation and it is slightly different...we received as part of our contract a certain amount of share options, I have not vested any of these options to date. Our company is now getting taken over and as part of the merger all our options are automatically vested and we receive cash for our share options (we receive the difference between what our shares were worth at the time of the contract and what they are being sold for as part of the merger). There is a rumour that because our shares are being vested for us (we have no say in them being vested) instead of us vesting them ourselves that we will only have to pay 20% tax instead of 42%, Is this true?


thanks in advance for any advice...
 
sarahot said:
I have not vested any of these options to date.
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Do you mean vested or exercised? You can have options vested and no tax liability because you still don't own the shares. Only when you exercise an option (which will have previously vested) will you own the shares and a tax liability arise in most or all cases. Note that vesting simply means that you now have the opportunity to exercise the share. The normal timeline for share options is (a) grant (b) vest (usually some time later) (c) exercise (any time after (b)) and (d) disposal at some point.
There is a rumour that because our shares are being vested for us (we have no say in them being vested) instead of us vesting them ourselves that we will only have to pay 20% tax instead of 42%, Is this true?
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I don't really understand this situation and find the use of the term "vesting" a bit confusing above. I presume you mean 20% tax instead of 41% since that's what the high tax rate is now. I don't know the answer but would be surprised if cash given to you in this way was not assessable for income tax unless there is some exemption involved.
 
Hi Clubman,

thanks for your help so far...its obvious I know nothing about shares! ;)

ok just for clarity - the shares are neither vested nor exercised, all this is being done for us by the purchasing company who will be taking over our company, we don’t have to do anything except pay the tax on the cheque we receive, there are no exemptions that we know of...
 
OK - so they are basically paying you for share options that were granted but not vested or exercised? If that is the case then I can't see how it could not be assessable for income tax at your marginal rate and maybe even PRSI as well (which does not normally apply to discounted share exercises as far as I know and as far as I've declared). But I'm not a tax expert...
 
I think your right, shares will be subject to income tax and not CBT...

thanks ClubMan..you've been a big help...
 
You should double check this so you are 100% sure of any tax liabilities arising from this situation. Normally a company in this sort of situation would at least give employees some high level taxation guidance to outline the issues although they will generally not (and not be authorised to) give actual advice.
 
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