The newly elected Liberal government indicated in its election
platform that it intends to increase taxes on employee stock option
benefits by limiting Canadian resident employees from claiming the
stock option deduction (i.e., the capital gains equivalent
taxation) in respect of option benefits in excess of $100,000
annually. As discussed in our earlier note on this topic
Will Tax Treatment for Canadian Stock Options Change?
the extent of grandfathering for existing options has been a hot
question since the election.
Minister Morneau indicated today at a press conference in
connection with the release of the Economic and Fiscal Update that
any changes with respect to the taxation of stock options would
only take effect from the date they are announced, and would not
affect options issued prior to that date. It appears that the
government may be giving further thought to what steps to take with
respect to this platform plank. The precise nature of any changes
remains to be seen, but today's announcement indicates that
currently outstanding options should not be affected and steps to
avoid adverse tax treatment by exercising such options prematurely,
with the disadvantages that would entail, appear unnecessary.
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