Key Employee Engagement Programme (KEEP): share options free of income tax, for small firms

Share options under this scheme, granted by 31 December 2028, are free of income tax, USC and PRSI on exercise. The gain pays only Capital Gains Tax on sale.

The Key Employee Engagement Programme (KEEP) lets small and medium-sized companies give staff share options without the usual tax on exercise. It is meant to help SMEs compete with larger employers for key people. Revenue approval isn't needed, but the conditions are strict.

The tax difference

With ordinary options, the gain on exercise is taxed through payroll at up to about 52%. With KEEP options, that gain is exempt from income tax, USC and PRSI. You pay Capital Gains Tax only when you sell, on the whole gain over the price you paid. By then the sale proceeds are there to pay it.

Take an employee earning €60,000 with 5,000 options at €2. They exercise them in June 2026 when the shares are worth €6, and sell in November 2026 at €8:

When options qualify

• Granted between 1 January 2018 and 31 December 2028, at no less than the market value of the shares on the day of grant.
• Not exercisable within 12 months of grant, nor more than 10 years after it.
• You work at least 20 hours a week for the company, or 75% of your working time, for the whole period. The job must be able to last 12 months or more.
• You don't hold a material interest of 15% or more in the company.
• The market value of options granted to you is within set limits: €100,000 in a year, €300,000 in total, and 100% of your yearly pay. The limits are set out in Revenue's manual.

Which companies can use it

Unquoted SMEs carrying on a qualifying trade, resident in Ireland or trading here through a branch, including qualifying groups. Shares quoted on Euronext Growth are allowed. The company's unexercised KEEP options can't be worth more than €6 million in total. It files a Form KEEP1 return for each year options are granted or exercised.

Selling the shares

Capital Gains Tax is charged on the sale proceeds less the price you paid. If you meet the conditions, Entrepreneur Relief may apply. A buyback of KEEP shares by the company can be taxed as a capital gain rather than income, subject to conditions.

For ordinary options, see share options tax. To compare your own options with the payroll route, use the shares from work calculator.

Work it out

• Tax on shares from work: RSUs, options and ESPP →

Sources

• Revenue: Unapproved share options (PAYE on exercises from 1 January 2024; RTSO before) (checked 16/10/2026)
• Revenue: How to calculate CGT (checked 25/10/2026)
• Revenue: eBrief No. 142/26: CGT standard rate reduced to 31% from 7 October 2026 (checked 25/10/2026)

General information, not tax advice. HeyPenny is not a tax agent.