BUDGET 2018 provides Start-ups with a tool to “KEEP” and motivate key employees
TECHNOLOGY, INNOVATION, LAW AND TAX
It is recognised that one of the challenges that start-up companies face is competition from large multinationals when it comes to the acquisition and retention of talent. The Finance Bill 2017 announced the introduction of a revamped tax incentive scheme (“Key Employee Engagement Programme” or “KEEP”) designed to help small and medium sized enterprises to retain and motivate key employees through the use of share options.
The current Irish tax regime for share-based remuneration has been criticised as not being sufficiently competitive with other jurisdictions. The main disadvantages of the existing tax treatment in Ireland are:
In order to avail of the new tax incentive scheme, certain keys conditions must be met, the main ones being as follows:
A company is a qualifying company if:
A qualifying individual:
A qualifying option:
The main benefits of KEEP are that qualifying individuals will only pay capital gains tax at a rate of 33% on disposal of the shares as opposed to income tax, USC and employee PRSI on the exercise of the option and CGT on disposal under the current regime.
It is envisaged that KEEP will be available for options granted between 1 January 2018 and 31 December 2023. However, the commencement of the scheme is subject to State Aid approval and it is possible for amendments to the scheme to be made prior to the enactment of the Finance Bill 2017. For that reason, start-ups wishing to put an option scheme in place should consider awaiting the enactment of the Finance Bill.
This Document is for general information purposes only and does not constitute legal or other professional advice. Specific legal advice should be sought on any particular matter.
For more information on Budget 2018 or KEEP contact:
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