Share Option Scheme

Taxation on the Share Option Fringe Benefit Scheme

Jake Ellis avatar
Written by Jake Ellis
Updated over a week ago

Legal Background

With the introduction of Legal Notice 205/2017 the rule concerning Share Options has now been amended to allow for a special tax rate with reference to this scheme.  Due to the recent changes in the tax rates, in order to bring the tax due to that prior to the changes, this special rate has been amended and fixed at the rate of 15%

Shares can be given to employees as part of their salary package, however the actual share transfer is not handled by Indigo Payroll. These shares still need to be taxed, at the above stated rate of 15%. Such taxation needs to be registered in FS3 and FS7 forms, along with being included in respective payrolls. Taxation is taken care of by Indigo Payroll, using a special pay item as per normal procedure. Share Option emoluments are automatically included in the Electronic Lodgement.

Shares can be allocated on a one-time basis, or on a recurring basis. 

One-Time Allocation

When giving an employee an allocation of shares on a one-time basis, the pay item needs to be added for that payroll only.

  1. Go to Payroll and Leave > Main > Payrolls.

  2. Select the roll in which the share is assigned.

  3. Select the employee, and click on the Pay Items tab.

  4. Click Insert.

  5. Search for the pay item listed as the Share Option Scheme with code SHAREOPT.

  6. In the Amount column, enter the amount of the share. Make sure to set the Number of Contributions to 1.

  7. Click Save.

Recurring Allocation

When the share allocation is set to be a recurring addition to the employee's monthly (or otherwise) payslip, the Share Options pay item can be included in an employee's payslip automatically.

  1. Go to HR > Main > Employees.

  2. Select the employee for which you would like to assign the pay item, and click on the Pay Items tab.

  3. Click Insert.

  4. Search for the pay item listed as the Share Option Scheme with code SHAREOPT.

  5. Set the amount of shares to be given at each payslip, and the number of contributions to 1. Make sure to set the start date and end date, while also changing any other settings as necessary (Amount Calculation and Contribution Calculation Settings, which allow you to change the amount and contribution at the calculation stage).

When calculating the roll, you will see that the added pay item is shown in the payslip.

It is worth noting that the amount of the share is not included in the pay amount, and is only there so that the tax is calculated accordingly. FS3s and FS5s are automatically updated with the share and tax amount, and require no manual amendments.

If you would like additional information as to how  share option tax is calculated , click on the information icon next to the entry.

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