Thursday 16 August 2018

EU backs tax break for SME share-options scheme

The European Commission in Brussels praised the move
The European Commission in Brussels praised the move
Colm Kelpie

Colm Kelpie

The European Commission has signed off on a Government decision to cut the tax levied on share options awarded to employees of smaller, often riskier companies.

The new Key Employee Engagement Programme (Keep) was announced in Budget 2018.

It is designed to help smaller firms recruit talented staff without draining the balance sheet, enabling them to offer potentially lucrative share options in lieu of a generous salary.

The scheme is due to run for six years.

The Commission said yesterday that it had approved the scheme under state-aid rules.

"SMEs in Ireland often do not have enough financial resources to offer competitive remuneration packages, making it difficult for them to attract and retain talented and skilled personnel," the Commission said in a statement.

"This hinders their productivity and prevents them from achieving their full growth potential. Thanks to the proposed Irish measure, SMEs could use share option agreements to offer a more competitive remuneration package to their employees.

"Provided on top of a fixed wage, these employee share options could enhance the ability of SMEs to attract and retain staff without the need to find immediate additional financial resources."

Brussels said the "public intervention" is needed to facilitate Irish SMEs' efforts to attract and retain employees.

It comes just weeks after the European Commission approved a €10m Irish Government scheme that can be tapped to support the restructuring of SMEs affected by Brexit.

The scheme was one of Finance Minister Paschal Donohoe's flagship Budget offerings for sectors most exposed to the fallout from Brexit. The Commission signed off on the scheme, saying it is in line with EU state aid rules.

Commissioner Margrethe Vestager said it will help SMEs in financial difficulty restore their competitiveness, while preserving competition in the single market.

Under that scheme, which will run until 2020, Enterprise Ireland can offer restructuring support to small and medium-sized companies in financial difficulty, especially if a company's failure would trigger job losses.

The support will be in the form of equity investments and will be available to SMEs active in all sectors of the economy, excluding steel, coal and finance.

Irish Independent

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