Moore Stephens
Canadian news

New stock option rules

This article is taken from our quarterly newsletter, Canadian Overview, published by the Canadian member firms of Moore North America. The articles in our newsletter are part of our mission to become the partner of choice for your success by keeping you up to date.

A new set of rules for all stock options issued after December 31, 2019 was due to come into force on January1, 2020. However, the Ministry of Finance recently issued a statement to the effect that the effective date of the new rules will be disclosed in a future communication, probably at the same time as the budget. This will be published in March or April 2020. Under this new plan, a portion of the stock option benefit is no longer eligible for the stock option deduction.

Under the current rules, which apply to non-Canadian-controlled private corporations (CCPCs), an individual can claim a deduction for a stock option if the exercise price is greater than or equal to the fair market value of the underlying stock at the time the option was granted. The deduction represents 50% of the taxable benefit.

Under the new rules, a calculation is made to determine whether or not the value of options acquired during the year exceeds $200,000. This means that all share values for options that vest during a year must be taken into account to determine whether their value at the time of grant exceeds $200,000. Of this amount in excess of $200,000, a portion of the stock option benefit will not be eligible for the stock option benefit deduction. This means that even if, in economic terms, an individual has received the same amount on exercising options as in previous years, the amount taxed will increase.

When a person can stagger the vesting of options so that the vesting amount is less than $200,000 per year, he or she can save on taxes. However, there is a risk that this person may lose these stock options because they did not vest as quickly as in other circumstances.

The new rules bring another major change: corporations can now deduct the stock option portion of the benefit, whereas individuals cannot. There are notification rules that companies must follow, both for the individual and for the Canada Revenue Agency, in order to be authorized. In addition, only the person’s direct employer can claim the deduction. This can be a problem if the stock option is issued by a foreign parent company and not by the individual’s actual employer.

These rules can become quite complex. So it’s best to consult your local tax expert for advice on how best to manage these changes for you and your business.

Written by Howard Wasserman, CPA, CA, Certified Financial Planner (CFP), Trusts and Estates Specialist (TEP), of Segal LLP. This document was written for our quarterly newsletter, Canadian Overview, published by the Canadian member firms of Moore North America.

Subscribe to receive our advice.

RECENT NEWS

Always well informed

Social Involvement: When Millennials Shake Up Practices

The social involvement of millennials: how this generation is transforming the modern company   The transformation of the business world is taking a new turn under the impetus of millennials. This generation, which represents around 50% of the active workforce in Canada, is redefining the criteria for making purchasing decisions and selecting employers. Social and [...]
READ

Innovation: All You Need to Know About the New CRIC Tax Credit

R&D, innovation and pre-commercialization tax credit: an opportunity for Quebec companies   The Québec 2025 budget introduced a new strategic tax tool for innovative companies: the Refundable Tax Credit for Scientific Research and Experimental Development, Innovation and Precommercialization (CRIC). Designed to boost research and development (R&D) activities and support pre-commercial initiatives, this credit can provide [...]
READ

Financial fraud: pitfalls to avoid to protect your business

The director of an SME specializing in industrial design has just received an e-mail bearing the logo of a government intellectual property agency. The document, adorned with a familiar-looking letterhead, reminds him that his trademarks are expiring, and that an urgent payment of $30,800 is required to maintain his rights. Concerned about protecting his intellectual [...]
READ

How a dashboard can revolutionize your business

In a business world where data is king, companies face a major challenge: transforming their data into strategic decisions. Your organization generates a wealth of valuable information every day, but without the right tools to exploit it, this data often remains under-utilized or misinterpreted. The modern dashboard is much more than a simple reporting tool. [...]
READ

What Is Business Intelligence Powered by Power BI?

Unlock the power of your data! A new business intelligence solution joins DB's arsenal. This new data visualization and interpretation service, powered by Power BI, gives you greater visibility of your performance and enables you to track trends, so you can make informed decisions. The power of business analytics Did you know that: 85% of [...]
READ

Artificial intelligence, machine learning and the accounting profession

This article, written by Scott Nabozniak CPA at Mobrey Gil, is taken from the quarterly overview of Canadian news, a newsletter published by Moore North America's Canadian member firms. The article, on the use of artificial intelligence tools in the accounting profession, is part of our mission to be the ultimate partner in your success [...]
READ

Deferral of Capital Gains Inclusion Rate Changes

The federal government has just announced important news regarding the taxation of investment profits (also known as capital gains): the new capital gains legislation announced in the fall of 2024 has been postponed until January 1st, 2026. The provincial government will follow the same direction as the federal government.

READ
  • Montréal
  • Brossard
  • Close to you wherever you go
  • Laval
  • Montréal
  • Brossard
  • Close to you wherever you go
  • Laval
  • Montréal
  • Brossard
  • Close to you wherever you go
  • Laval
  • Montréal
  • Brossard
  • Close to you wherever you go
  • Laval