Ireland: New Share Incentives for Key Employees

The Irish Minister of Finance announced in his 2018 Budget speech the introduction of a new tax-advantaged share option plan known as the Key Employee Engagement Programme (“KEEP”).

What is KEEP?

The Irish Minister of Finance announced in his 2018 Budget speech the introduction of a new tax-advantaged share option plan known as the Key Employee Engagement Programme (“KEEP”).

KEEP is aimed at ensuring that unquoted SMEs can attract, incentivise and retain key employees. It also allows employees, who satisfy the necessary conditions, to defer taxation on the receipt of share options until such shares are disposed of.

How does it work?

The value of the benefit to the employee when they exercise a qualifying option will be subject to tax only when the employee disposes of the shares, not at the time they exercise their option. The tax payable under KEEP will be Capital Gains Tax (currently 33%) rather than Income Tax plus Universal Social Charge (USC) and employee Payroll Related Social Insurance (PRSI), which could result in a top end rate of up to 52%.

Key Features

  • KEEP only applies to businesses involved in a qualifying trade. Land development, financial or professional services companies do not qualify.
  • There is a €3m limit on issued but not yet exercised options.
  • The total market value of shares issued as options to an employee or director are limited to:
    • €100k per tax year;
    • €250k over three concurrent tax years; and
    • 50% of an employee’s or director’s annual pay in the year in which the share option is granted.

An employee or director will not be able to take advantage of KEEP if they and any connected person, directly or indirectly own more than 15% of the ordinary shares of the company. It may be possible for some existing employee share options to be converted into KEEP.

When does it come into effect?

This incentive will be available for qualifying share options granted between 1 January 2018 and 31 December 2023; however, the introduction is subject to approval from the European Union (EU).

How will KEEP benefit my business?

KEEP is designed to make it easier and more tax efficient to grant share options to staff and to provide key employees with a financial incentive linked to the success of the company.

For more information on this latest development in Ireland or to discuss other aspects of global expansion, please contact David Jenkins.

David Jenkins
Partner / Head of GEA Network
+44 (0)20 7430 5881
djenkins@fitzandlaw.com

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