Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I move amendment No. 10:

In page 14, line 31, to delete “is incorporated and resident in the State, or” and substitute the following:“is incorporated in the State, or in an EEA state other than the State, and is resident in the State, or”.

Amendments Nos. 10 to 12, inclusive, relate to the new key employee engagement programme, KEEP, which was introduced in budget 2018. This is an SME-focused share option programme intended to help small, growing companies to attract and retain key staff. It operates by providing that any gain realised on the exercise of qualifying KEEP share options will not be subject to income tax, PRSI or USC at the date of exercise. The gain will, however, be subject to capital gains tax on a future disposal of the shares.

The relief, therefore, has a twofold benefit. First, it reduces the tax payable from income tax to capital gains tax rates. Second, and possibly more important, from the perspective of small unquoted companies, it provides that the tax will become payable on disposal of the shares when the sales proceeds would be available to pay the tax due.

These amendments make a number of technical changes to the KEEP legislation in order to ensure that it operates as intended and is in compliance with EU requirements.

Amendments Nos. 10 and 11 amend the definition of "qualifying company" to ensure that it is compliant with the EU freedoms. It expands the definition of "qualifying company" to include a company resident in Ireland and incorporated in an EEA state other than Ireland. It also allows for companies with a listing on similar or comparable markets to the enterprise securities market in an EEA state or a tax treaty country.

Amendment No. 12 ensures that a double relief cannot be claimed by providing that relief under the employment and investment incentive, EII, cannot also be claimed where relief applies under KEEP. I commend these amendments to the committee.

I would also note that my officials are continuing to engage with small business representatives following the publication of the KEEP legislation to ensure that the technical legislative provisions are operable in practice and that the scheme is effective in meeting its policy objective. I therefore wish to inform the committee that I may introduce further amendments to the legislation on Report Stage if necessary in order to ensure that the relief can operate as intended.

However I would also caution that any further amendments must be compatible with State aid approval and as such a balance may have to be struck between what is desirable and what is feasible.