For many Irish startups and growth-stage SMEs, equity is no longer an abstract idea reserved for Silicon Valley or listed multinationals. It has become a practical, everyday tool. Founders use shares to bring in early talent when cash is tight. Scaling businesses use equity to retain senior leaders. Growing companies design share structures to align long-term incentives, prepare for investment, or plan for eventual exit.
But alongside that opportunity sits one of the most complex and tightly monitored areas of Irish tax compliance: Employment-Related Shares (ERS).
In recent years, Revenue has dramatically increased scrutiny of share-based remuneration. Mandatory electronic reporting, automatic penalties, cross-checking with payroll and corporation tax returns, and enhanced data matching have turned ERS from a “later problem” into a front-and-centre compliance risk.
In 2025–2026, no Irish business that issues shares to employees or directors can afford to misunderstand ERS.
This guide explains what employment-related shares are, how they are taxed, what must be reported, why startups are particularly exposed, and how businesses can use equity strategically and safely with the right structure and advice.
Employment-Related Shares are shares or securities acquired by an individual because of their employment or directorship. The definition is intentionally broad. Revenue looks not at the label applied to the shares, but at the reason the opportunity arose.
If the right to acquire shares exists because someone is an employee, director, or office holder the arrangement falls within ERS.
This includes situations where:
a founder receives shares on incorporation
a director acquires shares at a discount
an employee receives shares instead of salary
share options are granted or exercised
restricted shares vest over time
growth shares are issued to senior staff
equity is used as a retention or incentive mechanism
The key question Revenue asks is simple:
“Would this person have been offered these shares if they were not employed or holding office?”
If the answer is no, ERS rules apply.
The increased focus on ERS is not accidental. Three major shifts have converged:
First, equity usage has exploded among Irish startups and SMEs. More companies are issuing shares earlier, often before they have formal HR, payroll or governance structures in place.
Second, Revenue has modernised its compliance systems. Like PAYE modernisation, ERS reporting is now fully digital, time-bound and penalty-driven. Revenue can match ERS data against payroll, Form CT1, Form 11, CGT filings and even company valuation changes.
Third, historic under-reporting was widespread. For years, share issues went unreported because businesses believed that “no tax due” meant “no reporting required.” That era is over.
In 2025–2026, Revenue treats ERS as a high-risk compliance area, particularly for startups.
ERS is not a single structure. It is an umbrella term covering many forms of equity and share-based incentives. Understanding the differences is critical, because tax treatment and reporting obligations vary.
These are the most basic form of equity. They often appear at incorporation or early funding stages, where founders or early employees acquire shares at nominal value.
The danger here is valuation. Even early-stage companies have a market value. If shares are issued at less than market value, the discount may be taxable as income.
Many founders assume that “€1 shares” carry no tax risk. That assumption is often wrong.
Share options give the right but not the obligation to acquire shares at a fixed price in the future.
Most Irish SMEs use unapproved share options, which are flexible but carry significant tax implications. Tax often arises on exercise, based on the difference between exercise price and market value at that time.
Crucially, tax may be due even if the shares cannot be sold.
Approved schemes exist (such as KEEP), but they have strict qualifying conditions and are not suitable for every business.
Restricted shares are subject to conditions such as forfeiture if the employee leaves within a certain period.
Revenue allows a reduction in taxable value for genuine restrictions. However, the restrictions must be real, enforceable and documented. Artificial or poorly drafted restrictions may be ignored.
Restricted shares still fall within ERS and must still be reported.
Growth shares are increasingly popular with Irish SMEs and PE-backed businesses. They entitle the holder only to future growth above a set threshold.
When structured correctly, growth shares can significantly reduce upfront tax exposure. When structured poorly, they can trigger unexpected income tax charges.
Valuation and documentation are critical here.
More common in larger or multinational environments, RSUs (Restricted Stock Units) and similar awards are also employment-related shares.
They are heavily regulated and almost always taxable at vesting.
ERS can trigger multiple layers of tax, often at different times.
If shares are acquired at less than market value, the discount is treated as employment income. This applies whether the individual is an employee or director.
Income tax can arise:
when shares are acquired
when restrictions lift
when options are exercised
In many cases, USC and PRSI also apply to the taxable benefit. This significantly increases the effective tax rate.
For founders and senior executives, this can come as a shock.
When shares are eventually sold, CGT applies to gains. This is separate from employment taxes and requires careful planning.
Failing to track base cost correctly can lead to overpayment or disputes.
One of the biggest practical risks of ERS is dry tax charges tax arising without any cash to pay it.
Common scenarios include:
exercising options in a private company
restricted shares vesting before liquidity
growth shares triggering income tax
founders acquiring shares early but later re-valued
Employees often assume tax only applies when shares are sold. That assumption is frequently incorrect.
This is where professional advice becomes essential.
Perhaps the most misunderstood part of ERS is the reporting obligation.
Any employer who has:
issued employment-related shares
granted or exercised share options
varied share rights
released restrictions
allowed vesting events
must file an ERS return electronically via ROS.
Reporting is mandatory even if no tax is due
Reporting is mandatory even if the employee pays the tax personally
Reporting is mandatory even if shares were issued at market value
Reporting is required every year a reportable event occurs
The deadline is 31 March following the tax year
Failure to file results in an automatic €3,000 penalty per return, with additional penalties for continued non-compliance.
For startups that issue shares to multiple employees over several years, penalties can escalate quickly.
From Revenue’s perspective, ERS represents a perfect storm:
subjective valuations
delayed liquidity
complex structures
historic under-reporting
high-value outcomes
Revenue now cross-checks:
ERS filings against payroll submissions
director shareholdings against CT1 returns
share valuations against funding rounds
CGT filings against historic ERS events
ERS is no longer an isolated compliance area. It is fully integrated into Revenue’s data ecosystem.
Startups face unique ERS risks:
shares are often issued informally
valuation is underestimated
reporting is overlooked
payroll and equity are disconnected
funding rounds change everything retrospectively
A common scenario we see at Amergin:
“We issued shares cheaply to founders and early employees. Two years later, during a funding round, Revenue queries why ERS returns were never filed — and penalties follow.”
These issues often surface during:
due diligence
investment rounds
acquisitions
Revenue audits
Fixing them later is possible but expensive.
ERS obligations do not sit solely with the employer.
Employees and directors may face:
unexpected personal tax bills
complex Form 11 filings
CGT planning challenges
timing issues around liquidity
Clear communication matters. Employees must understand:
when tax may arise
how it will be paid
what reporting occurs
what records they need
When this is not handled properly, ERS can damage trust rather than build loyalty.
At Amergin Consulting Ltd., we work with Irish startups and SMEs across the full ERS lifecycle from first share issue to exit.
We help clients choose the right structure:
ordinary shares vs growth shares
restricted vs unrestricted
options vs direct issues
This minimises tax risk while preserving commercial intent.
We assess:
whether shares are issued at market value
whether restrictions are valid
potential income tax exposure
This avoids unpleasant surprises later.
We:
prepare and file ERS returns via ROS
track reportable events
manage deadlines
eliminate penalty exposure
ERS does not exist in isolation. We ensure:
payroll treatment aligns with ERS
Form CT1 and Form 11 filings reflect equity correctly
CGT base costs are accurate
records are audit-ready
We advise individuals on:
timing of exercises
personal tax exposure
CGT planning
exit scenarios
This protects both the business and the people behind it.
ERS issues often derail deals. We clean up:
historic reporting gaps
undocumented share issues
valuation inconsistencies
This protects deal timelines and company value.
assuming “no tax means no reporting”
issuing shares without valuation
missing ERS filing deadlines
misusing restricted share relief
exercising options without tax planning
separating payroll and equity compliance
founders unaware of personal liabilities
Each of these is fixable — but prevention is far cheaper.
Employment-Related Shares can be one of the most powerful tools available to Irish startups and SMEs. They allow businesses to attract talent, conserve cash, align incentives and plan for long-term success.
But ERS also sits at the intersection of:
employment tax
income tax
capital gains tax
reporting compliance
valuation
governance
In 2025–2026, Revenue expects ERS to be treated with the same seriousness as payroll or VAT.
With the right advice, systems and reporting, ERS becomes a strength not a liability.
At Amergin Consulting Ltd., we help businesses use equity confidently, compliantly and strategically so growth is supported, not undermined.
Amergin Consulting Ltd. is a Dublin-based chartered accountancy and business advisory firm serving Ireland’s SMEs and growth companies across construction, technology, professional services, and renewable energy.
We specialise in Accounting, Payroll, Taxation, and CFO Services that help businesses build stronger foundations for profit and compliance.
Need help running a year-end tax review or planning your 2026 payroll changes?
Amergin Consulting’s finance and tax team can help you identify deductions, forecast cash flow, and ensure full compliance before the year closes.
Book your 30-minute consultation: https://calendly.com/amergin-group_free/30min-finance-consultation
This article is for general informational purposes only and does not constitute financial or tax advice. While every effort has been made to ensure accuracy, Budget 2026 legislation may change upon enactment of the Finance Act 2025.
Public should seek professional advice tailored to their specific circumstances before acting on any points discussed.
Revenue Commissioners — Employment-Related Shares overview
https://www.revenue.ie/en/additional-incomes/employment-related-shares/index.aspx
Revenue Commissioners — ERS Reporting Requirements
https://www.revenue.ie/en/additional-incomes/employment-related-shares/ers-reporting.aspx