Level 1 compliance intervention - Tax Liability on RSUs and ESPPs -2023

Have you received a letter from Revenue about tax on RSUs or ESPPs?

Revenue has recently sent out letters to taxpayers regarding their tax liability for share options exercised. Some people might be wondering what ‘Notification of Level 1 Compliance Intervention Re: Tax Liability of Share Options Exercised’ means.

What does Level 1 compliance intervention mean?

Level 1 Compliance Interventions help taxpayers become compliant on their own accord. During a Level 1 Intervention, taxpayers have the option to rectify any compliance issues through Self-Correction or by making an Unprompted Qualifying Disclosure, as needed.

Here’s what you need to do.

Before you proceed, it is crucial for you to carefully review and confirm whether you have obtained any shares from your Employee Share Purchase Plan (ESPP) or sold any Restricted Stock Units (RSUs) in the specific years requested by Revenue.

RSUs (Restricted Stock Units)

RSUs are not taxable upon enrolment. Their purchase, dividends, and sale are all taxable events.

ESPPs (Employee Share Purchase Plan)

ESPPs are not taxable upon enrolment. Their purchase, dividends, and sale are all taxable events.

Tax Obligations for RSUs and ESPPs

RSUs

• Granting – There is no action required upon the granting of an RSU.
• Vesting – There is tax due on the market value of the shares when they vest. 
• Dividends taken – Dividends are subject to tax and must be declared in your annual income tax return.
• Sale of shares – Capital Gains Tax (CGT) is due for the sale of shares. The amount taxed is the difference between the sale price and the full market value on the date that they vested.

ESPPs

• Enrolment – There is no action required upon enrollment of an ESPP.
• Purchase – There is tax due on the discount you receive in your shares. You must pay this to Revenue within 30 days from the date of purchase of shares.
• Dividends taken – Dividends are subject to tax and must be declared in your annual income tax return.
• Sale of shares – Capital Gains Tax (CGT) is due for the sale of shares. The amount taxed is the difference between the sale price and the full market value on the date that they vested.

Taxes explained

Income Tax
You are required to file an annual Income Tax Return. The deadline is on or before the 31^st October each year for the previous calendar year.

Capital Gains Tax (CGT)
You are required the calculate any tax due on the sale of your shares. The deadlines are as follows:
For sales between 1^st Jan – 30th Nov – Tax is due by 15^th Dec the same year.
For sales between 1^st Dec – 31^st Dec – Tax is due by 31^st Jan the following year.

Be aware - When a taxpayer does not respond to a Level 1 intervention, Revenue has the authority to proceed with either a Level 2 or Level 3 intervention if there is a significant level of risk involved. If a Level 2 or Level 3 intervention is scheduled, the taxpayer will be notified accordingly.

If you require assistance with your RSUs or ESPPs tax returns, you can contact us using the below form: