Deferral Of Payment Income Tax

Deferral of Payment of Income Tax under Section 128A TCA 1997

Clarification

Tax Briefing - Issue 41 contained a detailed article on the subject of Preliminary Tax (PT) and the making of an election to defer payment of income tax payable on the gain arising on the exercise of a share option. The article set out the position where an election is made to defer the tax payable on the exercise of a share option, in accordance with Section 128A TCA 1997 and the implications for the 90% (PT) rule. The tax payable for the year of assessment for the purposes of the 90% (PT) rule will be regarded as the tax payable for that year of assessment less the deferred amount of income tax payable in accordance with Section 128A TCA 1997.

Following a number of queries received, Revenue would like to clarify the following points:

• Where an election is made to defer the tax payable for the preceding tax year on the exercise of a share option, in accordance with Section 128A TCA 1997, the tax payable for the year of assessment for the purposes of the 100% (PT) rule will be regarded as the tax payable for the preceding year of assessment less the amount deferred in accordance with Section 128A TCA 1997 for that year of assessment
• Where an election is made to defer the tax payable for the tax year preceding the preceding tax year on the exercise of a share option, in accordance with Section 128A TCA 1997, the tax payable for the year of assessment for the purposes of the 105% (PT) rule will be regarded as the tax payable for the year preceding the preceding year of assessment less the amount deferred in accordance with Section 128A TCA 1997 for that year of assessment.