Equity based compensation schemes

Equity based compensation schemes

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It is commonplace for employers to use equity based incentives to reward employees. Some of these share schemes attract favourable tax treatment providing certain conditions are met. Below are the main type of share schemes:

  • Approved Profit Share Schemes
  • Unapproved share option schemes
  • Employee Share Ownership Trust
  • ‘Save as you Earn’ Schemes
  • Restricted Stock Schemes
  • Partly Paid Share Shcemes
  • Phantom Share Schemes
  • Forfeitable Shares

Also many employees are now awarded Restricted Stock Units which are subjected to PAYE withholding at source through Irish payroll. A Restricted Stock Unit (RSU) is a grant (or promise) to an employee that on completion of a ‘vesting period’ he/she will receive a number of shares or cash to the value of such shares. In this way, no shares or cash will pass to the employee until the vesting period has passed. Revenue have confirmed that where RSUs vest to an Irish tax resident they are taxable on the value received in full. However double tax relief may be available if the RSUs are taxable in a foreign location also.

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