The Key Employee Engagement Programme — KEEP — is the only Revenue-approved share-option scheme in Ireland that gives qualifying employees Capital Gains Tax treatment instead of income tax on the gain at exercise. For an Irish startup founder building a long-term equity culture, that is a 19+ percentage-point swing in net employee return on every option granted. And yet the majority of Irish founders we speak to are still issuing unapproved share options — usually because the KEEP setup paperwork looked like an Ernst-and-Young-grade engagement and they postponed it. This page explains what KEEP actually requires, what it costs, and why the gap between “unapproved options” and “KEEP” is the cheapest equity decision a founder will make this year.
What is the KEEP Scheme?
KEEP is a statutory share-option regime introduced in Finance Act 2017 and amended in successive Finance Acts. It is codified at Section 128F of the Taxes Consolidation Act 1997. The mechanic is straightforward: a qualifying Irish SME grants share options to a qualifying employee at fair market value strike. The employee exercises the option at some later date — typically four years and a vesting cliff out — and at that point pays no income tax, USC, or PRSI. They pay nothing until they sell the shares, at which point they pay 33% CGT on the gain over the option strike price. Compare that to unapproved options, where the employee pays up to 52% income tax/USC/PRSI on the gain at exercise — often before they have any cash to fund the tax bill.
Why KEEP beats unapproved share options
The case for KEEP is not just lower headline tax. It is also that the employee can afford to exercise. Under unapproved options, an engineer who has built four years of equity into your company is often forced to either let the options lapse (because they cannot fund the income-tax bill on exercise) or take out a loan to bridge it. KEEP defers the tax event until disposal — i.e. until the employee actually has cash from selling the shares. That alignment between when tax is owed and when cash is available is the single biggest reason founders who care about retention shift to KEEP.
Cap-table cleanliness is the second reason. Because KEEP options vest and exercise without triggering an income-tax event, the company avoids the awkward conversation about gross-up arrangements, employee loans, and “phantom equity” workarounds that plague unapproved schemes. Our cap-table legal health check shows how the unapproved-options approach often layers complications onto an already-tight founder-shareholder structure.
Eligibility — the qualifying company test
To grant KEEP options, the company must be an unquoted Irish-incorporated micro, small, or medium enterprise (under the EU SME definition: under 250 employees, balance-sheet total under €43 million, turnover under €50 million — but the KEEP-specific limits are tighter). Total balance-sheet assets must be under €15 million, and the company must carry on a “qualifying trade” within the meaning of Section 128F. Most active trades qualify. Passive investment, professional services in narrow categories, financial services activities, dealing in land and shares, and certain construction or commodity-trading activities do not. The scheme must be operated on a company-wide basis, meaning it cannot be a personal arrangement for one founder.
Eligibility — the qualifying employee test
Qualifying employees must work full-time for the qualifying company — minimum 30 hours per week — and remain in employment for the duration of the option vesting period. They cannot be material shareholders before the grant: holdings must be under 15% of the issued ordinary share capital. Limits on the value of options held are stacked: total market value of unexercised KEEP options cannot exceed €100,000 in any one year of assessment, €300,000 in any three-year period, and 100% of the employee’s annual emoluments. These caps apply per individual, not per company.
How to set up a KEEP scheme — the documents you need
A compliant KEEP scheme requires the following documents in this order: (1) a board resolution adopting the scheme rules; (2) shareholder approval of the scheme rules where the company’s constitution requires it; (3) the scheme rules themselves, drafted to align with Section 128F and the most recent Revenue eBrief guidance; (4) a fair-market-value share valuation methodology — usually a discounted-cash-flow or recent-financing-round reference — that Revenue can stand over on inquiry; (5) a board resolution per grant naming the employee, the option count, the strike price, the vesting schedule, and the qualifying-employee certifications; (6) a signed option agreement between company and employee referring to the scheme rules; and (7) annual Form KEEP1 returns to Revenue confirming the scheme remains compliant and listing all grants and exercises in the period.
OnlineLegalServices.ie’s KEEP Scheme setup at €395 fixed-fee includes documents 1, 3, 5, 6, and a template for the annual Form KEEP1. Document 2 is only triggered where the company’s constitution requires shareholder approval — which is increasingly the default in well-drafted constitutions. Document 4, the share valuation, is typically done by the company’s accountant and we coordinate with them on methodology.
KEEP scheme limits and 2026 thresholds
The headline thresholds at the date of writing: company balance-sheet assets under €15 million, turnover under €15 million, employee-level option limits at €100,000 per year / €300,000 per three years / 100% of annual emoluments. These figures have been updated multiple times since the scheme was introduced — the original 2017 limits were considerably tighter and were widened in Finance Acts 2019, 2022, and 2024 to reflect lobbying from the Irish startup community. Founders running grants under older paperwork should re-read their scheme rules against current statute. The Revenue eBrief search at revenue.ie/en/tax-professionals/ebrief is the canonical update source.
KEEP vs SAYE vs APSS — quick comparison
The other Revenue-approved schemes a founder will hear named are SAYE — Save As You Earn — and APSS — Approved Profit-Sharing Scheme. SAYE is a savings-linked share-purchase scheme typically run by listed PLCs; it is administratively heavy and generally not used by SME startups. APSS gives employees free shares funded out of company profits with income-tax relief on a capped amount, but does not work well for pre-profit startups because there is no profit to allocate. KEEP is the only Revenue-approved option scheme designed specifically for cash-constrained, pre-exit Irish SMEs with a long-hold equity story.
Common mistakes founders make with KEEP
Three patterns we see repeatedly. First, granting KEEP options to a non-qualifying employee — typically a contractor, an under-30-hour-per-week part-timer, or a director who holds 15%+ of the company before the grant — and discovering at exercise that the option is unapproved by default. Second, pricing the option at less than fair market value because the founder thought they were being generous; this voids KEEP treatment and reverts to unapproved tax. Third, missing the annual Form KEEP1 return; missing it once is recoverable, missing it three years running is a structural problem.
Layered on top: founders who treat KEEP as a substitute for a clean Founder Shareholders Agreement or proper vesting agreements. KEEP solves the tax-treatment question for new option grants. It does not solve the founder-equity-split, leaver-provisions, or pre-emption questions that should already be in place before the first option is ever issued.
Frequently asked questions
How much does it cost to set up a KEEP scheme in Ireland?
OnlineLegalServices.ie sets up a fully compliant KEEP scheme for €395 fixed-fee, including scheme rules, board resolutions, qualifying-employee determination, qualifying-trade analysis, and the option-grant template. Standalone equivalents at full-service Dublin firms start in the €1,500 to €4,000 range and bill hourly thereafter. The fixed fee assumes a single class of ordinary shares and up to ten initial grantees; complex cap tables or multiple share classes are quoted separately in writing before any work begins.
Which Irish companies qualify for the KEEP scheme?
A qualifying company under Section 128F TCA 1997 must be an unquoted Irish-incorporated SME carrying on a “qualifying trade” (most active trades qualify; passive investment, dealing in land or shares, professional services in some narrow categories, and certain financial-services activities are excluded). Total balance-sheet assets must be under €15 million, and turnover under €15 million. The scheme must operate company-wide, not personally to one founder.
Which employees qualify under the KEEP scheme?
Qualifying employees must be full-time (minimum 30 hours per week) employees or directors of the qualifying company, employed for the duration of the option vesting period. They must hold no more than 15% of the issued ordinary share capital before the grant. The total market value of unexercised KEEP options held by an individual cannot exceed €100,000 in any one year of assessment, €300,000 in any three-year period, and 100% of the employee’s annual emoluments.
How does KEEP tax treatment differ from regular share options?
Under standard unapproved share options the employee pays income tax, USC, and PRSI on the difference between option strike price and market value at the date of exercise (top marginal rate often 52%). Under KEEP, the employee defers tax until disposal of the shares and pays Capital Gains Tax (currently 33%) on the gain over the option strike price. For founders building a long-hold equity culture, this is a 19+ percentage-point swing in net employee return.
Can a remote-only Irish startup use the KEEP scheme?
Yes — the qualifying company must be Irish-incorporated and carry on its qualifying trade in the State or in the EEA, but employees can work remotely within the EEA. Founders headquartered in Cork or Dublin and hiring engineers in Berlin, Lisbon, or Amsterdam can grant KEEP options to those employees provided the employment relationship and qualifying-trade tests are met. Cross-border tax residency complications should be addressed at grant.
Set up your KEEP scheme
If you are an Irish startup founder thinking about issuing options to one or more employees in the next twelve months, set up KEEP first. The cost difference between doing it right now versus retrofitting from unapproved options later is roughly 10x in legal fees alone, and the employee retention difference is uncountable. €395 fixed-fee KEEP setup with us, or book a 30-minute online consultation with an Irish solicitor first if you want to talk through whether your company qualifies before you commit. Pricing is published on our solicitor fees page — no retainer, no hourly meter.