Taxes Consolidation Act 1997 section 128

Tax treatment of directors of companies and employees granted rights to acquire shares or other assets

Section 128 imposes an income tax charge on gains realised by directors and employees from the exercise, assignment, or release of rights to acquire shares or other assets granted by reason of their office or employment.

• A taxable gain arises when a director or employee exercises, assigns, or releases a share option or other right to acquire assets, calculated as the market value at the date of exercise less the cost of acquiring the shares and the cost (if any) of the option itself.
• From 1 January 2024, the employer must account for income tax, USC, and PRSI on the gain through the PAYE system; gains realised before that date were taxable under self-assessment, with the individual required to pay the tax within 30 days of exercise.
• Anti-avoidance rules ensure that where the gain is realised by someone other than the employee or director — for example, through a transfer at below market value or to a connected person — the employee or director remains chargeable to tax on the gain.
• Employers must electronically file a Form RSS1 return with Revenue by 31 March following the year in which options are granted, exercised, assigned, or released; where the granting company is non-resident, the Irish subsidiary or branch representative is responsible for filing.