Under an Approved Profit Sharing Scheme, the usual arrangement is that employees are given the right to convert an otherwise taxable discretionary profit sharing bonus into shares in their employing company or its parent.
Under Revenue practice employees may also apply a percentage of basic gross salary towards the purchase of shares. This is known as "salary forgone". The salary forgone element must be a subsidiary part of the overall scheme. The amount forgone cannot exceed 7.5% of basic salary or the amount of the employer funded bonus, whichever is lower. The salary forgone option must be voluntary rather than compulsory.
There is an overall annual limit on the value of shares which can be appropriated of €12,700 per employee per tax year.
Under an APSS shares are held in trust for a minimum of two years. Where the shares are held for three years no charge to income tax arises.
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