Company giving ESOP

suave.4u

Hi guys,

Advice needed.
My company allows employees to but company ESOPs. Employees can purchase shares at the market rate, but the company adds in 15% more for every monthly amount that the employee buys shares for.
So if I purchase shares worth 200 euros, I actually get shares worth 230 Euros.
The share prices are a bit less now, and this is a good time to stock up.
Now my question is, it is worth purchasing these shares taking into account the taxes I have to pay for these shares.
For example last month I received 910 Euros worth of shares, but close to 675 Euros were added to the total taxable income as tax. Now when I sell my shares, even though I may get a good return, I am worried once the tax on it is paid, will I get anything in hand.

Thanks a lot for your help.

Regards,

gordongekko

suave.4u wrote: »

Hi guys,

Advice needed.
My company allows employees to but company ESOPs. Employees can purchase shares at the market rate, but the company adds in 15% more for every monthly amount that the employee buys shares for.
So if I purchase shares worth 200 euros, I actually get shares worth 230 Euros.
The share prices are a bit less now, and this is a good time to stock up.
Now my question is, it is worth purchasing these shares taking into account the taxes I have to pay for these shares.
For example last month I received 910 Euros worth of shares, but close to 675 Euros were added to the total taxable income as tax. Now when I sell my shares, even though I may get a good return, I am worried once the tax on it is paid, will I get anything in hand.

Thanks a lot for your help.

Regards,

run that last paragraph by me again. You lost me there. How was €675 added to your taxable income? That does not sound right. Your bik would be a lot less than that.

suave.4u

Hi,

Thank you.
I just checked the last payslip again. There is a BIK of 547 Euros. Every year, once a month we get some shares (around 25) with 40% discount, so 910 euros is actually worth 1450 euros worth of shares , so I think that part is fine (Please leave that part).

Anyways, for a regular month, I get to purchase 230 euros worth (I put in 200 euros and the company adds in 15 %). I can see that there is no BIK tax added.
When I sell these shares (the prices of a single share should go up by atleast 10%), once the tax part is negated, I am wondering whether this would be a good investment.

Help is appreciated.


Regards,

gordongekko

suave.4u wrote: »

Hi,

Thank you.
I just checked the last payslip again. There is a BIK of 547 Euros. Every year, once a month we get some shares (around 25) with 40% discount, so 910 euros is actually worth 1450 euros worth of shares , so I think that part is fine (Please leave that part).

Anyways, for a regular month, I get to purchase 230 euros worth (I put in 200 euros and the company adds in 15 %). I can see that there is no BIK tax added.
When I sell these shares (the prices of a single share should go up by atleast 10%), once the tax part is negated, I am wondering whether this would be a good investment.

Help is appreciated.


Regards,

sorry you have lost me on the first paragraph now are these shares in addition to the shares in the second paragraph.


Im not upto date on the tax situation but
For the shares in the second paragraph I would expect to see a bik charge of around €30 ie the bik charge is the 15% .

The bik charge in the first paragraph seems about right ie the difference between the 910 and the 1450.

suave.4u

Hi,

Yes, please discard the first part . Sorry, this is all new for me.
There is no BIK charged for the 230 euros shares (these are part of the Employee Discounted Stock Purchase Plan ). I am wondering about the tax on this if I plan to sell them at a later point of time.
15% is added by the company every month, so I thought this would add up over a period of time.

gordongekko

suave.4u wrote: »

Hi,

Yes, please discard the first part . Sorry, this is all new for me.
There is no BIK charged for the 230 euros shares (these are part of the Employee Discounted Stock Purchase Plan ). I am wondering about the tax on this if I plan to sell them at a later point of time.
15% is added by the company every month, so I thought this would add up over a period of time.

As far as I know you should be charged bik on the €30. As a general rule shares perform well over the long term but as an employee you would be in a better position to decide the long term prospectsof the company than anyone here.

alanceltic

As a general rule employee share schemes are very tax efficient, there have been recent changes where the tax efficiencies have been slightly eroded as you don't get the benefit of saving PRSI on contributions which you would previously have gained. If you are on the higher rate of tax the savings are even more attractive so this is worth considering.

There are many different schemes so its hard to know the exact details and you seem a little confused yourself (understandable as its quite complex).

Basically your employer should be operating the scheme and the deductions in such a way that your tax/bik on entry is flushed through your weekly wages. This will leave you in a position where you only pay CGT on the profits, the profits would be calculated at the discounted cost price and the tax rate is currently 33% less the small allowance (approx. 1,200) you are allowed to earn before paying any CGT.

The thing you must satisfy yourself is that the tax on entry or acquisition of the shares is being looked after on your wage calculations.

As I said it a very efficient way of saving money and gives you a vested interest in where you work, you should have some idea on the prospects of where you work so it comes down to your taught on how well they are performing. Not everyone has the option of such schemes so be grateful that you at least have the option to consider it and most people do very well out of it.

suave.4u

Thank you guys.
Yes, I know the share price would go up by 20% atleast in the coming years and the fact that the employer adds another 15%, makes this very attractive and I am truly grateful as well .
As I said, there is no BIK on the EDSP amount, so I do not think they are charging EDSP BIK.
So my worry is that they may charge a bulk tax when they pay out the shares; was just looking for advice on that part.

gordongekko

suave.4u wrote: »

Thank you guys.
Yes, I know the share price would go up by 20% atleast in the coming years and the fact that the employer adds another 15%, makes this very attractive and I am truly grateful as well .
As I said, there is no BIK on the EDSP amount, so I do not think they are charging EDSP BIK.
So my worry is that they may charge a bulk tax when they pay out the shares; was just looking for advice on that part.

well if you just leave it on deposit you might get just 1-2% interest pa so having to pay tax on any gain in excess of €1200 probably means you have done ok out of the investment.