New stock option regime set to take effect this July – Benefits Canada

Colena Der

Apr 28, 2021

The Canadian government’s Budget 2021 indicated the new stock option regime announced in the November 2020 economic statement will go ahead with proposed changes likely to come into force on July 1.

Benefits Canada contributor Julius Melnitzer writes that the changes put in place a cap of $200,000 on employee stock options eligible for preferential treatment under the Income Tax Act, but for the first time, tax deductions will be available to employers for option benefits actually realized by employees.

Melnitzer reached out to Osler’s Colena Der, a partner in the Calgary office of the Tax Advisory Services Group, about the issue.

“The budget confirmed the government’s intention to proceed with previously announced tax measures, as modified to take into account consultations and deliberations since their release,” Colena says. “But the budget document did not indicate which of the listed tax measures will be amended to take into account further consultation and deliberations. The budget itself does not include any new changes to the stock option proposal.”

The Benefits Canada article states it’s unlikely that the final version of the changes will differ substantially from the existing draft, but the government could make additional amendments before finalizing.

“The new rules, and the method and timing for assessing ‘qualified option’ status, will definitely increase the compliance and administrative burden of stocks options going forward,” Der says. “However, employers typically grant options annually, so we expect that the review of the ‘qualified’ status of prior year grants will be wrapped up into this annual process.”

For more information, read Julius Melnitzer’s full article, "New stock option regime set to take effect this July,"  published April 28, 2021 in Benefits Canada.