Revenue Note for Guidance

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Revenue Note for Guidance

128E Tax treatment of directors of companies and employees who acquire forfeitable shares


This section sets out the tax treatment of shares acquired by directors and employees where the shares are subject to forfeiture if certain circumstances arise or do not arise (e.g. if the employee or director ceases employment with the company within a specified period). It applies to shares acquired on or after 20 November 2008.



(1)director” and “employee” have the meanings respectively assigned to them by section 770(1);

market value” is to be construed in accordance with section 548;

forfeitable shares” is to be construed in accordance with subsection (3);

shares” includes stock.


(2) The section applies where a director or employee acquires shares in a company as a director or employee of that company or of another company, and at the time of acquisition the shares are forfeitable shares.

Forfeitable shares

(3) & (4) To come within the section shares must be forfeitable shares. Shares are forfeitable shares if there is a bona fide written contract or agreement in place under the terms of which—

  • there will be a forfeiture of the shares, if certain circumstances arise or do not arise (e.g. if the employee ceases employment before the expiry of a specified period),
  • as a result of the forfeiture, the director or employee will cease to have any beneficial interest in the shares, and
  • the director or employee will not be entitled to receive, directly or indirectly, consideration in money or money’s worth in respect of the shares on their forfeiture in excess of the consideration given by the director or the employee for the acquisition of the shares.

Shares are not forfeitable shares by reason only that the shares are unpaid or partly paid shares that may be forfeited for non-payment of calls.

Income tax charge

(5) The income tax charge on acquisition of the shares (under Schedule E or Schedule D) is to be calculated by reference to the market value of the shares at that time, ignoring the risk of forfeiture.

Forfeiture of shares

(6) & (7) If the shares are forfeited, any income tax, income levy or universal social charge already imposed will be removed and any tax, levy or charge overpaid will be repaid by the Revenue Commissioners on foot of a claim from the director or employee, which must be made (notwithstanding the general time limits for making claims for repayment of tax set out in section 865) within 4 years from the end of the year of assessment in which the forfeiture takes place.


On 1 January 2016, an employer awards 1,000 shares to an employee for €200. Under a bona-fide written contract, the shares are subject to forfeiture if the employee ceases employment with the employer before 31 December 2019. The market value of the shares at the date of the award, ignoring the risk of forfeiture, is €1,000. The employee ceases employment with the company on 1 August 2018 and the shares are forfeited. The employer refunds the employee the €200 paid for the shares.

Income Tax charge on acquisition

Market value of the shares ignoring the risk of forfeiture


Consideration paid by the employee

€ 200

Chargeable amount

€ 800

Tax paid (€800 × 40%)

€ 320

Forfeiture of shares

Revised income tax charge


Refund due


The employee must make a claim to the Revenue Commissioners on or before 31 December 2022 for the refund of tax of €320.

Capital Gains Tax

(8) Any loss arising on the forfeiture of shares is to be restricted to the amount of consideration given by the director or employee for the shares less any amount subsequently recovered by him or her on the forfeiture.


(9) Companies must provide details of all awards of forfeitable shares made to employees and directors together with details of any forfeitures to the Revenue Commissioners in an electronic format approved by them not later than 31 March in the tax year following the year in which the awards are made or the forfeitures occur, as the case may be.

Relevant Date: Finance Act 2020