Ireland - More Changes and Clarifications Regarding PRSI on Equity Awards - Baker & McKenzie 30 Aug 2011

Ireland - More Changes and Clarifications Regarding PRSI on Equity Awards

On
August 23, 2011, the Irish Minister for Social Protection announced
another change to the social insurance requirements for equity awards. 

Under this latest proposal, employee
Pay-Related Social Insurance ("PRSI") will apply to all equity award
income from January 1, 2012, regardless of an award's grant date, with
the sole exception of shares already held in an Employee Share Ownership
Trust before January 1, 2011.  We understand that employer withholding of the amounts due will be required.

This
is a partial reversal of the Minister of Finance's announcement on
March 18, 2011, which was interpreted to provide an exemption from
employee PRSI for awards granted prior to January 1, 2011.  As a result of the August 23rd announcement, the exemption from employee PRSI for pre-2011 grants will apply only during 2011.

At the same time, the Minister for Social Protection has reaffirmed the exemption from employer
PRSI (first announced in May 2011) that applies to all equity awards,
and further clarified that employers should not currently be paying
employer PRSI, notwithstanding that the legislation to enact the
exemption is still pending.  Based on the Minister's
published statement, it appears that the same approach may be taken to
employee PRSI otherwise due on any awards granted prior to January 1,
2011.

Refunds of Amounts Paid in 2011 -
Finally, the Minister's statement clarifies that to the extent employee
PRSI has been paid on income arising from equity awards granted prior
to January 1, 2011 or that employer PRSI has been paid on any awards, a
refund may be obtained by offsetting the amounts paid against current
PRSI liabilities through the monthly P30 return and end-of-year P35
return. Further details of the conditions for and method of availing of
the offset of PRSI are provided in a Notice on PRSI Refunds that has
been issued by the Irish Department of Social Protection.

Although the
legislation giving effect to these latest PRSI changes is yet to be
enacted and is expected as part of the next Social Welfare Bill, it
appears that the Minister for Social Protection intends employers to act
in accordance with its August 23rd announcements.  Therefore,
companies should withhold employee PRSI on awards granted since January
1, 2011 only, should not pay employer PRSI, and should be prepared to
withhold employee PRSI on all awards starting January 1, 2012.  We will be closely monitoring this issue in case there are further changes before the release of the Social Welfare Bill.  In the meantime, please contact your GES attorney for more information