Employee Benefits

Proposed Changes to Taxation of Stock Options For Canadian Employees

By Guest Blogger: Baker Tilly WM LLP on September, 10 2019

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Our good friends at Baker Tilly WM LLP wrote an informative piece about the proposed taxation changes to employee stock option plans in Canada. Here is a summary of some of the key points you need to know. You can read the full article here.

taxation-of-employee-stock-options-in-canada

 

Do you currently offer stock options to your employees? If so, you may be affected by proposed changes in the draft legislation released on June 17, 2019. 

The changes would remove the preferential tax treatment currently available to all corporations. The new legislation would limit the 50% reduction in the taxable benefit to certain classes of companies.

 

How Will The Proposed Taxation Changes Affect Your Company? 

The effect of the new legislation would increase the tax burden on employees of non-CCPC (Canadian Controlled Private Corporation) companies that exceed an annual vesting limit of $200,000 or who do not qualify as start-ups, emerging, or scale-up companies—the definition of which is still to be determined.

Of course, with a pending federal election, the legislation may never see the light of day. However, if our current Canadian federal government remains in power, there will be only a short window of time to prepare for the changes to the taxation of stock options for employees, which are scheduled to take effect on January 1, 2020.  

tax-on-employee-stock-optionsThe primary effect of the legislation is that the tax burden shifts from the corporation to the individual. Thus, employees of affected companies will receive less net compensation. Therefore, they will be looking to re-negotiate their overall compensation in order to make up the shortfall.  

 

Next Step

The proposed legislation, if passed, will lead to heavier tax consequences to the stock option holders—your executives. So how can you help? Offering other tax-efficient compensation options to attract and retain your executive personnel is a viable solution. 

To learn more about tax-effective compensation alternatives to stock options for your executive team, please join us for our September 18th webinar: Tax Effective Compensation for Executives: Beyond Stock Options. Save your spot now. 

Canadian Benefits 302 Webinar: Tax-Effective Compensation for Executives: Beyond Stock Options

Attracting and retaining talented executives can be challenging. Learn how to craft competitive compensation strategies to keep them happy with our 1-hr webinar. 

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