Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Question 222: To ask the Minister for Finance the changes in the tax treatment of share options that have been made since 2005; and if he will make a statement on the matter. [15348/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The provisions of section 128 of the Taxes Consolidation Act 1997 govern the taxation of share options. Under these provisions a charge to income tax under Schedule E arises on gains realised by directors or employees from the exercise, assignment or release of rights, which are granted to them by reason of their office or employment, to acquire shares or other assets in a company. In the case of share options, the income tax charge arising on the exercise of an option is calculated by reference to the difference between:-the market value of the shares on the date the director or employee exercises the option (and acquires the shares), and -the aggregate of the price paid by the director or employee for the shares and the amount (if any) paid for the option.

Where options are assigned or released, the income tax charge is calculated by reference to the consideration received by the director or employee on the assignment or release, less the amount (if any) paid for the option.

Section 128 of the Taxes Consolidation act 1997 was amended in the Finance Act 2005 in relation to share options acquired by individuals who were non-resident at the time the options are granted.

Section 16 of the Finance Act 2005 extended the income tax charge to individuals who, at the time of the granting of the share option - (a) were not resident in Ireland for tax purposes; and (b) whose income was not within the charge to Irish tax.

The amendment applies to shares options granted on or after 5 April 2007.

The purpose of the amendment was to tax the gains arising from share options attributable to a period of the duties of an office or employment exercised in the Ireland where the share option was granted prior to the individual coming to the Ireland.

The amendment came about as a result of an OECD recommendation that countries should adopt a common approach in applying their double taxation treaties in relation to issues arising from the use of share options as part of employee remuneration packages. Depending on the timing of taxation by individual countries, for example, by reference to receipt of the option or exercise of the option, the then existing treatment could have resulted in either double taxation or double non-taxation.

There was also an amendment made in section 15 of the Finance Act 2006 concerning the remittance basis of taxation, which may indirectly affect the taxation of share options.

Finally, in relation to share options acquired under a Revenue approved Savings-Related Share Option Scheme (SAYE Scheme), Section 13(1)(a) of the Finance Act 2008 increased the maximum monthly amount of savings that can be used for the purposes of such a scheme from €320 to €500.