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Companies granting employee stock options in Canada should follow this proposal closely. In particular, if the proposal is enacted, companies will need to be prepared to track which options qualify and do not qualify for the deduction at the time of grant so that the employer can satisfy its reporting and withholding obligations and comply with new notice requirements for non-qualified options.
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Canada reintroduces stock option proposals
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Example Ms. Recommendations Before these new Option rules take effect, employers may wish to revisit their employee compensation plans. Originally proposed in the federal budget, with draft legislation released on June 7, , and to have taken effect on January 1, , but delayed on December 19, Share Linkedin Twitter Email Print.
Disclaimer Unsolicited emails and other information sent to Dentons will not be considered confidential, may be disclosed to others, may not receive a response, and do not create a lawyer-client relationship. Cancel Accept. Redirection You are switching to another language. Please click Confirm below to continue. Important Notice Agree Disagree. The following key take-aways emerge: As the new regime applies only to stock options granted after June 30, , public corporations may wish to consider granting stock options prior to that date so as to benefit from the grandfathering.
Disclosure and related issues will need to be considered. As a practical point, given the coming into force of these proposals, it is expected that most annual grants are excluded from the new regime.
Employee stock options: Are you exempt from new tax rules? | HRD Canada
For options granted after June 30, , a public corporation granting options will need to decide whether, and what portion, of shares underlying options will be designated as Non-Qualified Securities. Such a designation will be adverse to employees since the option benefit will no longer qualify for capital gains-like treatment , but beneficial to the corporation which will be entitled to claim a tax deduction. Corporations may wish to consider whether, and to what extent, the benefit of any corporate-level tax deduction should be shared with employees—whether by way of increased stock option grants or otherwise.
Stock option plans and grant agreements may need to be amended to accommodate the designation of Non-Qualified Securities and the notice requirements under the proposed rules.
Employee stock options: Are you exempt from new tax rules?
Employers will need to track any options granted to their employees even where such options are actually granted by a related corporation in order to ensure that their notification obligations are satisfied. This may require information sharing between human resources groups and internal tax groups.
Where a significant number or proportion of a corporation's employees may be subject to full taxation on stock options, consideration should be given to other forms of equity-based incentive awards, including phantom stock or share appreciation rights. Send Print Report.
Bennett Jones LLP. Blake Haarstad.
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