An ESPP is a way for employees to purchase shares in their company through payroll deductions, sometimes at a discounted price. Once you have enrolled in the plan, your company will collect your payroll contributions to purchase the shares on a specific date.
There is normally a 15% discount of the market value of the shares, on either the first day of the offer period or the last day of the offer period.
The discount is applied to the market value on whichever day had the lower value. The offer period is normally six months.
Generally, there'll be a maximum percentage of your salary that you can invest in the plan. You decide how much net salary or wages you wish to contribute to the plan. You contribute the same amount each month for a six month period. Your contributions are held on your behalf by the company, usually in a non-interest bearing account. At the end of the six months the contributions are used to purchase shares for you.
The discount allowed by the company is chargeable to Income Tax as a benefit derived from your employment. The amount chargeable is the difference between the market value of the shares when they were purchased on your behalf and the amount you pay for those shares.
You'll pay Income tax, USC and Employee PRSI on the amount of the discount. All deductions will be through payroll under the PAYE System.
Some ESPPs may be drafted in such a manner that would make them share option plans. This however, will depend on each individual plan.
Comments (0 comments)