1. Meaning of share-based remuneration
Share-based remuneration has a specific meaning for PRSI purposes and is defined in section 2(1) of the Social Welfare Consolidation Act (as amended by Section 10 of the Social Welfare and Pensions Act 2012 and Section 4 of the Social Welfare and Pensions Act 2014). It essentially means remuneration given to an employee in the form of shares (including stock and securities) in the company in which the employee holds his or her office or employment, or in a company which has control of that company. Shares in any other company do not come within the definition of share-based remuneration. All types of share option gains come within the definition.
2. The charge to PRSI
Remuneration in the form of shares in companies other than that in which the employee holds his or her office or employment, or in a company which has control of that company, has been within the PAYE system since 2004 and remains fully chargeable to both employee and employer PRSI.
Remuneration in the form of shares in the company in which the employee holds his or her office or employment, or in a company which has control of that company, was brought within the PAYE system by Finance Act 2011. With effect from 1 January 2011, all such share-based remuneration is chargeable to employ ee PRSI (subject to transitional arrangements outlined in paragraph 8). Employ er PRSI is not chargeable.
3. Amount chargeable to PRSI
The receipt of shares by an employee is treated as a perquisite for income tax purposes and the rules that apply to the taxation of notional pay also apply for PRSI purposes. These rules are set out in the Benefit-in-kind frequently asked questions (FAQS) document which is available at www.revenue.ie.
In the case of share options exercised by an employee, PRSI is calculated on the net gain to the employee.
4. Recording of PRSI
As share-based remuneration is derived from insurable employment, it should be recorded under the PRSI Class applying to the employee at the time he or she receives the shares (if subject to vesting, the time of vesting) or exercises the share options, as the case may be, even if any benefit or gain accrues to the individual after he or she has left the particular employment.
Because the amount that is chargeable to PRSI is different for employees and employers it may attract different PRSI subclasses. Where this occurs the following should be noted: Example: If a Class A employee has weekly pay of €350 and, in a particular week, has gains from share-based remuneration of €200. Employee PRSI is calculated on income of €550 - Subclass A1. Employer PRSI is calculated on income of €350 - Subclass AO. Employer and employee PRSI should be added together as normal. If a different subclass applies to the employee and to the employer, the return must always be made at the employee's subclass.
5. Payment of PRSI
The obligation to deduct and remit PRSI in respect of share-based remuneration generally rests with the employer (see section 6 for the treatment of share option gains). Accordingly the PRSI payable should be deducted by the employer through payroll along with other PRSI liabilities and remitted to the Collector-General with the monthly P30 return.
6. Share options
PRSI on any gains made by an employee on the exercise of a share option is, in some instances, not deducted and remitted through the PAYE system. Instead, depending on the particular circumstances (outlined in paragraphs (a) and (b)), PRSI may have to be remitted directly to the Collector-General or to the Department of Social Protection's Special Collection Section.
(a) Taxable share option gains
Income tax (known as 'relevant tax on share options' or RTSO) on most types of share option gains is remitted directly by the employee to the Collector-General. PRSI is to be paid along with RTSO (and the universal social charge) to the Collector-General within 30 days of the exercise of the share option using the form RTSO1. The form RTSO1 is available at www.revenue.ie and should be used for gains made on options exercised on or after 1 May 2012. This form should be used regardless or not of whether the individual is still in the employment of the company that granted the share option.
(b) Save as you earn schemes (SAYE)
Gains made on the exercise of share options received under Revenue approved SAYE schemes are not chargeable to income tax. In the case of share options exercised when the individual is still employed by the company that granted the share option, the obligation to deduct and remit PRSI rests with that employer. Accordingly, the PRSI should be deducted by the employer through payroll along with other PRSI liabilities and remitted to the Collector-General with the monthly P30
Where a share option is exercised after the individual has left the employment, the obligation to pay the PRSI falls instead on that individual. PRSI should be paid directly to the Department of Social Protection's Special Collection Section within 30 days after the share option has been exercised. Form SBR1 is to be used for this purpose. Form SBR1 is available on the Department of Social Protection website, http://www.welfare.ie/en/downloads/prsi_srb1.pdf
7. Summary of Payment Arrangements
|Share-based remuneration other than share options
||Employer deducts employ ee PRSI and remits to Revenue with P30 return
|Taxable share option gains
||Employee pays PRSI along with RTSO and USC directly to Revenue using RTSO1 within 30 days of exercising option|
|SAYE share option gains
||Employer deducts employee PRSI and remits to Revenue with P30 return if employee still in the employment
||If employment has ceased, ex-employee pays PRSI direct to DSP via Special Collections System within 30 days of exercising option|
8. Share-based remuneration for the tax year 2011
Transitional arrangements applied to PRSI chargeable on share-based remuneration realised during the 2011 tax year.
During 2011 employer PRSI was abolished. If employer PRSI was deducted on the gain from share-based remuneration during 2011, it may already have been recouped by offsetting against other the PRSI liabilities through P30 returns. (Details of how to secure the recovery of Employer PRSI were provided on the Department of Social Protection website here.)
Where employer PRSI paid in 2011 has not been recouped through P30 returns, application for a refund may be made by the employer directly to the Department of Social Protection.
Certain employee PRSI, where the share-based remuneration was the subject of a written contract or agreement that was in place prior to 1 January 2011, may not have been chargeable to PRSI in the 2011 tax year. Where such an agreement was in place, application for a refund of the employee PRSI may be made by the employer or employee directly to the Department of Social Protection.
Details of how to secure the recovery of PRSI in the circumstances described above are provided on the Department of Social Protection website, www.welfare.ie
Applications for refunds of PRSI in these circumstances must be made directly to the Department of Social Protection at:
PRSI Refunds Section
Department of Social Protection
Gandon House, Amiens Street, Dublin 1
Applications for refunds cannot be made earlier than the last day of the contribution year in respect of which the contributions were made.