Restricted Stock Options & Tax in Ireland

Written By - David Bruton

If you're an employee in Ireland who has been granted RSUs (Restricted Stock Units), you may be wondering about the tax implications. RSUs are a type of compensation that companies offer to their employees, and they can be a valuable addition to your overall compensation package. However, it's important to understand how RSUs are taxed in Ireland so that you can make informed decisions about your finances.

What are RSUs

Restricted Stock Units are a form of equity compensation that companies offer to their employees. Essentially, they represent the right to receive a certain number of shares of the company's stock at a future date. The shares are typically granted to the employee on a vesting schedule, meaning that the employee will receive a portion of the shares over time as they continue to work for the company.

RSUs are different from stock options, which give the employee the right to purchase company stock at a set price. With RSUs, the employee is not required to purchase any shares, and they do not own any shares until they vest.

Taxation of RSUs in Ireland

When you are granted RSUs, they are typically subject to income tax and USC (Universal Social Charge) in the year they vest. The value of the RSUs is added to your taxable income for that year, and you will be taxed at your marginal tax rate.

For example, let's say you are granted RSUs that vest in 2022, and the value of the shares at that time is €10,000. When the RSUs vest, that €10,000 will be added to your taxable income for the year, and you will be taxed at your marginal tax rate. If your marginal tax rate is 40%, you would owe €4,000 in income tax on the RSUs.

In addition to income tax, RSUs are also subject to USC. USC is a tax that is used to fund social welfare programs in Ireland, and it is assessed on your total income, including any RSUs that vest.

It's important to note that if you sell the shares that you received from the RSUs, you may also be subject to capital gains tax. Capital gains tax is a tax on the profit that you make when you sell an asset, such as stock. The capital gains tax rate in Ireland is currently 33%, although there are some exemptions and reliefs available.

RSUs can be a valuable form of compensation for employees in Ireland, but it's important to understand how they are taxed. When RSUs vest, they are subject to income tax and USC, and if you sell the shares, you may also be subject to capital gains tax. It's a good idea to consult with a tax professional to help you navigate the complexities of RSU taxation and make informed decisions about your finances.

If you have any questions on RSU's, get in touch with us below.

David Bruton

Head of Accounting & Tax

David Bruton is a graduate in Business from the Cork Institute of Technology. He is a Fellow of the Association of Chartered Certified Accountants and a Chartered Tax Advisor. David has more than 15 years of experience working in practice with SMEs, multinationals, and high net worth individuals. In addition to dealing with ongoing accounting and tax compliance for clients, David’s areas of expertise also include personal and corporate tax planning, VAT and the international aspects of the Irish tax system. David enjoys trying to take the mystery out of tax for clients. Outside of work, David’s interests include reading, weightlifting and rugby.