W8-BEN Selling US share options

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dsludds

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The company I work for granted shares to me at a certain price ( I didn't pay anything) and when I sell them I will get the price in between.
That is, there are shares hold in my name at a US broker, say at a price of $50 each. If the share price goes up to $60 and I sell them I will get $10 per share exercised.

- Am I correct saying that this is a "share option" and liable to income tax rather than capital gains?

- I filled the form W8-BEN which I am told I am not taxed in USA. What happens to this form when I exercise shares, do they send it to revenue in Ireland and it is deducted as part of the PAYE or do I have to declare it seperately?
 
W8-BEN gets held by your US broker - it simply authorizes them to not apply US withholding tax to any gain you make. I would be highly surprised if the form every makes it way to Revenue - it's a form that the Broker must be able to show to US tax authorities (IRS) - but as there is a tax treaty between US/IRL, you never know.

No PAYE tax is deducted.

There are generally 2 such stock schemes: RSUs (Restricted stock units), and Stock options.

Stock options - your company gives you the right to buy shares in it's stock at a predetermined price, say $X. If you exercise them at a price greater than $X (you'd be nuts to exericise below $X) you then are liable for benefit in kind tax on the gain - and have to fill out form RTS01 (google search that and you'll find it) & must submitt payment to Revenue within 30 days.
You are also obligated to file self-assessed taxes (i.e. form 11) for that tax year.

RSUs... you get the granted free shares in ur company... and get to sell them whenever the right vests. This is similar to a stock option with strike price of 0, however you do not have to pay tax within the 30 days - but have to pay by Oct 31 of the following year (but you may need to pay preliminary taxes).
 
When the shares came into your name you got a BIK of 50 if that was the market price. You are liable to tax on that at the exchange rate on the day.
This tax cannot be dealt with via PAYE. It must be dealt with by a personal tax return by 31st Oct on the following year.
Depending on when you got the shares you may have a late return problem. Were they before 2009?

When you sell the shares you are liable to CGT at 25% on the gain over $50.

If you get dividends on the shares you will need to include them on your tax return.

Information Sharing
There are information sharing agreements between Ireland and USA. However an Irish Revenue audit would also discover this. Also, Revenue at this stage would have a fair idea of companies paying such awards.

It would be better to get it sorted.


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Thanks for the advice, meanwhile finance people in the company I am working for informed me that they are not subject to BIK and I have to fill RTS01 when I exercise them.
 
You are liable for the gain if they are part of a share option scheme where they are discounted to the market price. Usually a 15% discount in an ESPP. You get BiK'd on the 15%, and then CGT'd on the gain over the sale price (-market price, as you already paid tax on it).
 
dsludds what your finance dept has told you seems to match with what it says in other posts here on AAM. See http://www.askaboutmoney.com/showthread.php?t=49218 , http://82.195.144.147/showthread.php?p=304048 & http://www.askaboutmoney.com/showthread.php?t=65599&highlight=ESPP. The information from John Conlon & colm5 above seems to contradict those posts.


I also recently received shares via an Employee Stock Purchase Plan (ESPP). I paid a fixed percentage of my salary every month for 6 months and at the end of six months I got shares at the lower of the initial/final price less 7.5% (which in this instance was the initial price less 7.5% as share price had increased quite a bit in the purchase period).

I have a couple of questions

- Both the Revenue leaflet on RTSO (http://www.revenue.ie/en/tax/it/forms/rtso1.pdf) and ClubMan in this thread () say that income tax applies on the market value at the time that the share options are exercised/acquired minus the discounted price. Just to be 100% sure, I assume the date the shares are exercised is the date that the shares were purchased by my employer and transfered into a brokers account for me (i.e. which could be different to the date I sell the shares)?. For tax purposes its irrelevant whether I sell them on that date I still have to pay RTSO tax based on realizable profit on that date (so in theory I could pay the RTSO due but not sell the shares until a later date. At that later date the share price could have dropped but I would have paid tax on a higher share price)

- The shares were awarded and purchased in dollars and deposited into a US brokers account. What exchange rate should I use to calculate the amount to be submitted to revenue with the RTSO1 form? Should I find a rate on the internet that would be approximate for the day the shares were purchased. (deductions were from my wages in Euro over the course of the 6 months)
 
Answer: yes, yes.

i.e. pay RTSO tax based on the date the shares were bought by your employer on your behalf. And for the exchange rate, use the one for that date.
 
RTSO1 applies to options. there is aseparate slot on Form 11 relating to awards. the main issue here is that you would still have to complete Form11 but not RTSO1.


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Hey all,
where do RSUs (restricted stock units) go on Form11?

RSUs are free shares my company gives me every so often. i.e. I pay nothing.
Clearly there is a BIK liability here. It's not a share option (unless you consider it as an option with strike price of $0).

Is the benefit liable to PRSI, income levy, health levy?

Cheers
 
John Conlon said:
RTSO1 applies to options. there is aseparate slot on Form 11 relating to awards. the main issue here is that you would still have to complete Form11 but not RTSO1.


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Click to expand...

Thanks for clarifying the difference John
 
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