How is the RTSO (Relevant Tax on Share Options) calculated when you exercise options in Ireland?

When you exercise a share option as part of your employment in Ireland, the gain (the market value of shares acquired minus the option price paid) is subject to Relevant Tax on Share Options (RTSO) — a special tax the employee must pay directly to Revenue, not through their employer's payroll.

How the RTSO charge is calculated:

• Taxable gain = Market value of shares on exercise date minus exercise price paid
• RTSO is charged at your income tax marginal rate (40% for most higher earners) plus USC and PRSI (Class A — 4%)
• The effective combined rate for a higher-rate taxpayer is approximately 52%

Example: You exercise an option to buy 1,000 shares at €5 per share when the market price is €15. Your taxable gain is 1,000 × (€15 - €5) = €10,000. RTSO due (at 52%): approximately €5,200.

How and when to pay RTSO:

• RTSO must be paid to Revenue within 30 days of the exercise date using a Form RTSO1
• Payment is made online via ROS or myAccount
• Failure to pay within 30 days results in interest charges at 0.0219% per day

CGT on later sale of shares:

When you later sell the shares, CGT at 33% applies to any further gain above the market value on the date of exercise (your cost base for CGT). The RTSO gain and the CGT gain are separate — you don't pay tax twice on the same amount.

Tax-advantaged alternatives: If your employer operates a Revenue-approved scheme such as a SAYE (Save As You Earn) plan, different (more favourable) tax treatment may apply. Unapproved share options (the most common) always follow the RTSO route.