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July 14, 2021

Canada's proposed changes to taxation of employee stock options now law

Significant changes to the taxation of employee stock options first proposed in 2019 received Royal Assent on June 29 and are now law. The new rules introduce a $200,000 annual limit on employee stock options that may qualify for the 50% stock option deduction. This limit will generally not apply to stock options granted by Canadian-controlled private corporations (CCPCs) or non-CCPCs with annual gross revenue of $500 million or less. The changes will apply to stock options granted on or after July 1. The new rules impose significant additional notification and tracking requirements on companies and will further complicate the process of withholding and reporting on the exercise of options.

A Tax Alert prepared by Ernst & Young Canada, and attached below, provides additional details.


Full text of Tax Alert