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Cash a stock options

Options
  • 21-05-2020 10:52pm
    #1
    Stinfo
    Registered Users Posts: 5 ✭


    Hi all,

    Could you please advise me on this:

    I have a stock option with the company. After 1 year I can sell part of the shares. If I decide to sell them for cash than the procedure is 52% tax and form RTSO1. So far it's clear.
    My doubt is:
    If instead of selling the shares, I buy them at the strike price by putting money into my trading account and later on I sell them. In this case do I pay only 33% on the capital gain instead of the 52% on the total amount?


    Many thanks


Comments

  • Options
    #2
    elgriff
    Registered Users Posts: 461 ✭✭elgriff


    Been in a similar boat. Not certain, but I think an RTSO1 is just the first part. I still think you need to do a Form 11 or 12. RTSO1 within 30 days I think it is.

    Why would you need to put money into your trading account to buy them?


  • Options
    #3
    marc1
    Registered Users Posts: 137 ✭✭marc1


    RTSO1 and payment are due within a month.
    Form 11 is also due the year after yes.

    My understanding is if you exercise the option and "buy them at the strike price" you still pay 52% on discount you got at that time. (discount = market price - strike price)
    You pay 33% CGT on any profits made thereafter (if any)


  • Options
    #4
    Calahonda52
    Registered Users Posts: 12,193 ✭✭✭✭Calahonda52


    step 1 is exercising the option so if the SP was 1 euro and the value on the exercise date is 3, then IT is payable on the 2.
    You now have an asset valued at 3 and if you sell it for 4, the CGT on the 1

    so no escaping the 52% hit on the gain of 2
    https://www.paylesstax.ie/paye-taxpayers-how-share-options-are-taxed/

    “I can’t pay my staff or mortgage with instagram likes”.



  • Options
    #5
    okidoki987
    Registered Users Posts: 10,616 ✭✭✭✭okidoki987


    If I remember correctly, Revenue brought in the "tax after exercising the option" when a lot of the staff of, at the time, American companies exercised the options and then left the company and country with their shares and Irish Revenue got nothing off them.
    As their shares had soared, this was a big loss to the exchequer.
    Revenue then decided to get something off them before/if they left so now the company does the donkey work for the Revenue to collect the 1st tax due.
    The company I worked for gave us 3 choices, pay it upfront, pay it through salary deductions or selling some of the shares to pay for it.
    I had to tell a few staff to remember to take off the amount they had paid for the option from the proceeds when they sold their shares for the CGT bill as most of them were 1st time share buyers and didn't know they could do that.


  • Options
    #6
    iAcesHigh
    Registered Users Posts: 447 ✭✭iAcesHigh


    Very interested in this one as I presumed the same as OP, if I do "buy" shares at a strike price and sell them afterwards they would be due "only" the CGT, but not the IT. These things seem to be settled quite bad in a country that's supposed to be business-friendly :)


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  • Options
    #7
    Stinfo
    Registered Users Posts: 5 ✭Stinfo


    Calahonda52 wrote: »
    step 1 is exercising the option so if the SP was 1 euro and the value on the exercise date is 3, then IT is payable on the 2.
    You now have an asset valued at 3 and if you sell it for 4, the CGT on the 1

    so no escaping the 52% hit on the gain of 2

    Thank you very much Calahonda, the example in that website is very clear.


  • Options
    #8
    iAcesHigh
    Registered Users Posts: 447 ✭✭iAcesHigh


    Just an additional question, is €1,270 exception applicable for share options?


  • Options
    #9
    relax carry on
    Registered Users Posts: 4,072 ✭✭✭relax carry on


    Do employers who provide these shares in lieu of actual money not tell their employees what their tax obligations are?

    https://www.revenue.ie/en/additional-incomes/employment-related-shares/index.aspx


  • Options
    #10
    relax carry on
    Registered Users Posts: 4,072 ✭✭✭relax carry on


    iAcesHigh wrote: »
    Just an additional question, is €1,270 exception applicable for share options?

    The 1270 euro refers to capital gains when the share are sold by you. So if you have capital gain, it's available for use in the CGT calculation.


  • Options
    #11
    iAcesHigh
    Registered Users Posts: 447 ✭✭iAcesHigh


    relax carry on wrote: »
    The 1270 euro refers to capital gains when the share are sold by you. So if you have capital gain, it's available for use in the CGT calculation.

    so it applies if I buy shares and then make gain, but if I just exercise my options and need to pay IT then not... Thanks


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  • Options
    #12
    marc1
    Registered Users Posts: 137 ✭✭marc1


    Appologies for resurtecting this old thread, but in case this pops up in search, I want to outline somehting that I got wrong in the past:

    Two scenarios relevant to many US multinationals:

    RSU (Restricted Stock Units): As described above since relatevely recently, your compnay should pay Income Tax that's due for you through PAYE when these vest. You should see this on your payslip. Usually if 100 shares vest on a given day, you on see 48 of those actually appear in your trading account. You pay CGT on any profits you make after the vesting date of your shares.

    ESPP (Employee stock purchase plan). This is where you can put a percentage of your income into a pot that will be used after 6 months to buy shares in the company that you work for. You get a 15% discount on the shares - usually either on the lowest price of the 6 months or otherwise on the lower of either the first day or the last day of that 6 months period. The purchase price can then also be locked in for another three 6-months-periods, allowing you to potentially buy shares at a subtantial discont a couple of years late.

    In this scenario, Income Tax is due on the different between your pruchase price and the market value of the share with a months of you receiving the shares (even if you don't sell them). This is done through the RTSO1 form. When you sell the shares, you pay CGT on any further gains on top of the market value on the day you received them.

    As exmaple: A share is worth 100 Euro on day 1 of the 6 month and is worth 125 on the last day of the 6 months. Your purchase price is 85 Euro (100-15%). You pay IT on 125-85= 40 Euro. You sell the share a year later for 150. You will additionally pay CGT on the 25 Euro additional profit made.



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