Optimum Tax Return

What are my tax obligations when my company grants me RSUs or share options?

david parker
By david parker

One PAYE employee thought his company shares were “already sorted through payroll” — until his RSU vesting, share option exercise and later share sale were reviewed as three separate tax points.

If your employer gives you RSUs or share options, the tax treatment depends on what you received, when it vested or was exercised, and whether you later sold the shares.

The mistake many employees make is thinking there is only one tax event. There may be more than one.

First, what did your company actually give you?
Your tax obligations depend on whether you received:

  • RSUs
  • share options
  • discounted shares
  • shares under an approved share scheme
  • KEEP options
  • shares you later sold
    Revenue treats employment-related shares as share-based income, and unapproved shares or options can trigger Income Tax, USC and PRSI. Approved schemes and KEEP options can have different tax treatment, so your exact scheme matters.

If you receive RSUs
An RSU is usually a promise that, after a vesting period, you will receive shares or the cash equivalent of shares. Revenue explains that the vesting period may depend on time, your performance, or company targets.

  • For share-settled RSUs, you pay Income Tax, USC and PRSI on the market value of the shares when they vest, or when the shares pass to you if earlier. Your employer normally deducts this through payroll and pays it to Revenue.
  • For cash-settled RSUs, you pay Income Tax, USC and PRSI on the cash payment, and your employer normally handles this through payroll.

The key point is simple: You are usually not taxed just because you were promised RSUs. You are taxed when the RSUs vest or are paid.

If you receive share options
A share option gives you the right to buy shares at a set price. The tax treatment depends on whether it is a short option or a long option.

  • For a short option, which can be exercised within seven years of grant, Revenue says there is no tax due on the date the right is granted. Tax arises when you exercise the option.
  • For a long option, which can be exercised more than seven years after grant, tax may arise at grant if the option price is less than the market value of the shares at the grant date. Revenue says Income Tax, USC and PRSI apply to that difference, with payroll deductions made by your employer.

What happens when you exercise a share option?
When you exercise a share option, your taxable gain is broadly the difference between the market value of the shares on the exercise date and what you paid for them, including any amount paid for the option. Revenue calls the tax on exercise Relevant Tax on Share Options, or RTSO.

For gains realised on or after 1 January 2024, your employer must account for Income Tax, USC and PRSI through payroll. Revenue says you do not need to register for RTSO or submit an RTSO1 form for these post-2024 exercises.

For gains realised before 1 January 2024, the old RTSO rules still matter. You had to pay RTSO within 30 days of exercise, submit an RTSO1 form, and file an Income Tax Return for that year.

What if you sell the shares later?
Selling the shares is separate from the payroll tax event.

If you later dispose of shares received from RSUs or share options, you may have a Capital Gains Tax obligation. Revenue says you must report the disposal of RSU shares even where no tax is due, and your employer will not deduct or report the disposal for you.

For share options, Revenue also explains that the option exercise and share sale are separate taxable events: RTSO applies on exercise, while CGT can apply on the later sale or disposal.

That means your payslip may show tax deducted correctly, but you may still need to report the later share sale.

What records should you keep?
You should keep:

  • your RSU grant documents
  • your vesting statements
  • your share option agreement
  • exercise date and exercise price
  • market value on vesting or exercise
  • payroll payslips showing tax deducted
  • broker statements
  • sale proceeds
  • foreign withholding tax details, if any
  • dividend statements, if you received dividends

This matters because Revenue notes that dividends and share disposals may need to be declared separately, even where employment tax has already been handled through payroll.

The simple way to think about it
You may receive the grant. You may later vest. You may exercise.

You may sell. You may receive dividends.

Each step can have a different tax treatment. And you will not know if your tax position is clean until your RSUs, share options and share sales are checked properly.

Worth 5 minutes to check if your company shares are being taxed properly? Get started with you tax return