For start up and growth companies employee share incentive schemes are essential tools to help attract and retain talent.
The current tax treatment for share options for Irish employees is punitive, with an effective tax rate of over 50% applying on gains made by the employee on exercise of the option. Revenue approved schemes offering some relief have not proved attractive and are rarely used.
In his Budget announcement yesterday Minister Paschal Donohoe confirmed the introduction of a new Key Employee Engagement Programme (KEEP) which will apply from 1 January 2018 for share options granted by SMEs, and will apply CGT rates to taxable gains rather than income tax.
This is a welcome development but details on the Programme are currently sparse and to be fleshed out over the coming days.Let's hope it provides some meaningful improvement on the current position for Irish early stage and growth companies.
“Research has shown that employee financial participation can be effective in increasing competitiveness and helping companies to attract and retain staff in a competitive labour market,”