​REVENUE APPROVED PROFIT-SHARING PROFIT SCHEMES
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Approved Profit Sharing Schemes (APSS) provide companies with tax incentives to give shares to their employees. The approval of the Revenue Commissioners Revenue is required to operate such schemes.
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The employee is exempt from income tax on the shares appropriated. The employer remains liable to Universal Social Charge (USC) and employee Pay Related Social Insurance (PRSI). Employer PRSI does not apply to share-based remuneration.
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A trust is required to acquire and hold the shares for the participating employees. The shares must be ordinary shares and held in trust for a minimum of two years. After that time, participating employees can dispose of the shares, but they will be subject to Income Tax.
Shares disposed of after three years are exempt from Income Tax.
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Capital Gains Tax (CGT) may also be due where the shares are disposed of.
You can claim a Corporation Tax deduction for your contributions to the trust and the cost of establishing the scheme.
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ESOT
An ESOT is a tax-favoured trust mechanism established by a company for placing shares into the hands of employees. Shares can be retained in the trust for up to 20 years for distribution to employees. ESOTs are normally used in tandem with an APSS.
The company establishing the ESOT must not be under the control of another company. Schemes to date have mainly been set up by state and semi-state bodies.
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Reporting requirements
The trustees of an approved scheme must file an annual return, even if there is no scheme activitiy for that particular year:
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Form ESS1 - for trustees of an APSS
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Form ESOT1 - for trustees of an ESOT.
These returns must be filed even if there is no scheme activity for that particular year. Failure to make a timely return can result in withdrawal of approval of the scheme.
For more information please see Share reporting obligations.
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Source: Website of Revenue Commissioners