In furtherance of the new share plan reporting requirements that were introduced as part of the Finance Act 2020, the Office of Irish Revenue Commission (“Irish Revenue”) published the “Return of Information by a Company for Employment Share Awards” (“Form ESA”) on 22 June 2021. Form ESA can be found here.
In brief, Form ESA requires companies granting share-based awards, including restricted stock units, convertible shares, forfeitable shares, discounted shares (e.g., stock purchase rights not treated as stock options for Irish tax purposes), and/or awards that provide the cash equivalent of shares to employees in Ireland to disclose certain information about such awards to Irish Revenue (on an individual-by-individual basis). Form ESA does not cover stock options or stock purchase rights granted under an employee stock purchase plan that are treated as stock options for Irish tax purposes; these awards will continue to be reported to Irish Revenue via Form RSS1 (which can be found here).
Companies initially must electronically file Form ESA for the 2020 tax year (ending 31 December 2020) no later than 31 August 2021. For subsequent tax years, Form ESA must be electronically submitted no later than 31 March following the end of the applicable tax year (same deadline as for Form RSS1).
Next Steps for Employers
- REVIEW award activity for employees in Ireland during the calendar year ended 31 December 2020.
- SUBMIT Form ESA for reportable activity during the calendar year ended 31 December 2020 no later than 31 August 2021.
- PREPARE for submission of Form ESA and Form RSS1 for reportable activity during the calendar ending 31 December 2021, which will be due no later than 31 March 2022.
Overview of New Reporting Obligations under Form ESA
Share Programs Impacted by New Form ESA
Before the publication of Form ESA, Irish Revenue provided no formal reporting guidelines or forms for certain types of awards, including restricted stock units and restricted shares. However, the Finance Act 2020, which was signed on 21 December 2020, provided various changes to the tax reporting framework for share-based awards, including mandating new annual electronic reporting guidelines for the following award types:
- Restricted Stock Units
- Restricted Shares
- Convertible Shares
- Forfeitable Shares
- Discounted Shares (e.g., shares acquired via stock purchase rights not treated as stock options for Irish tax purposes)
Scope of Reportable Events under Form ESA
Based on the guidance provided by Irish Revenue as part of publishing Form ESA, some of the reportable events that must be captured on Form ESA include:
|Restricted Stock Units (RSUs)|
|Vesting of RSUs (reporting of the grant of RSUs is optional)Disposal of RSUs operated under a “sell-to-cover” regimeEntitlement to or payment of dividendsForfeiture of share-settled RSUs|
|Award of restricted sharesDisposal of restricted shares before the conclusion of the specified restricted periodForfeiture of restricted shares after the conclusion of the specified restricted period|
|Award of discounted shares that include matching shares, shares free of charge, and shares at undervalue or discounted priceDividend equivalents paid through the award of additional traches of shares|
Deadline for Filing Form ESA
The deadline for filing Form ESA generally will be 31 March following the end of the tax year (ending 31 December) during which the reportable events occurred. However, for the tax year ending 31 December 2020, employers must submit Form ESA to reflect reportable events occurring during the 2020 calendar year no later than 31 August 2021. Instructions and explanatory notes for the completion and electronic filing of Form ESA are included in the form itself, as well as Irish Revenue’s Share Schemes Manual (which can be found here).
For additional information regarding the preparation and submission of Form ESA, please contact your Baker McKenzie Compensation attorney.