Topical Issues

As part of the Jobs Initiative announcement on 10 May 2011, the Irish Minister for Finance has confirmed a reversal of the social security (PRSI) charge for employers which was to apply to share based remuneration from 1 January 2011. We have been making representations to the Department of Finance on this point in recent weeks that the new charge was significantly increasing the cost of doing business in Ireland and that it was not sustainable in the current climate. It appears these arguments were noted and the result today will undoubtedly be warmly welcomed by many companies who were facing PRSI exposures on share plan commitments to staff.

It appears that the 4% employee PRSI charge will remain but it is assumed that this will only apply to share awards which are not evidenced by a written agreement predating 1 January 2011. The Finance (No.2) Bill and Social Welfare Bills due for publication in the coming weeks will provide greater clarity on this change.

We will continue to update this webpage as more information is made available regarding any related measures.

The Irish Finance Bill 2010 (which is to be enacted in April) contained fundamental changes to the reporting requirements for share schemes. For a summary of these changes, please see our 'Share Schemes and New Reporting Requirements' bulletin.

On a separate point, organisations should be mindful of the scope for trailing tax liabilities where share options (and certain other rights e.g. stock appreciation rights, certain RSUs) are being exercised by inbound or outbound assignees. Please see 'Ireland – Share Options Update – Internationally Mobile Employees*' bulletin for a reminder of the changes introduced in 2007.

The Commission on Taxation proposals, published 7 September 2009, include a variety of recommendations related to share based remuneration. The Commission’s proposals in relation to the extension of a charge to social security to all forms of employee share incentive arrangements would represent a significant change in policy if adopted by Government.

Please see our bulletin for further details of the recommended changes impacting share incentive arrangements.

On a related issue, it should be noted that there has been a recent technical change in relation to the employee health levy, unrelated to the Commission’s proposals. One of the consequences of this change is that the taxable value of share based remuneration will now be subject to the health levy. Employee communication materials may therefore need to be revised to ensure that employees are aware of this new payment obligation in addition to the increased income levy.