Whilst our footprint is global, Global Shares was founded in Ireland and is headquartered in Ireland - so as a company we fully understand the design and operation of Approved Profit-Sharing Schemes.
An APSS scheme is one of two types of employee ownership schemes that are approved by the Revenue Commissioners. It works by allowing employees to purchase shares from any bonus that they receive from there company, and in some cases match that same amount from their salary.
These shares are then held in a trustee share account for three years, and should they choose to keep their shares during that period, the employee is not liable for income tax.
As an employer, you can use it as a key tool in your compensation and benefits strategy to retain your key talent. It is a proven method of rewarding and motivating an existing workforce and a cost-effective alternative to giving cash bonuses or pay rises.
How does it work?
Establishing the scheme:
It is necessary to work with the Revenue Commissioners prior to implementation of your plan to seek approval and to ensure that you company is fully compliant from a legal and tax perspective. The maximum annual limit of allocated shares that an employee can receive is €12,700.
Period of retention:
If an employee chooses to sell their shares before the agreed release date, they are liable to income tax on 100% of the sale proceeds. A lower tax rate may be charged in certain circumstances.
Appropriation of shares:
If an employee holds their shares for the appropriate time period, they are liable to pay a universal social charge (USC) and PRSI on the date that they are appropriated. However, the liability for income tax does not arise.
Disposal of shares acquired:
If shares acquired under an APSS are subsequently sold, capital gains tax may be due where the disposal proceeds exceed the locked in value of the shares at the date of appropriation.
Why should you consider an APSS?
- It allows employees to participate both financially and tax your company.
- Profit sharing schemes are operated as an effective recruitment and employee retention measure.
- Your company obtains tax relief for the funds given to the trustees to acquire shares and the cost of establishing the scheme.
- There is a 10.75% tax saving of PRSI for the employer where remuneration is by way of equity participation rather than cash or other benefits.
For more information about what Global Shares can offer with regards your company's APSS, book a one-on-one, no obligation consultation today and we’ll demonstrate our award-winning software.