Changes to the taxation of stock options

Witholding and remittance requirements new for 2011
By Paul Carenza and Miriam Al-Shikarchy
|Canadian Payroll Reporter|Last Updated: 12/01/2010

Draft legislation was recently released by the Department of Finance to implement amendments to the tax treatment of stock options announced in the 2010 Federal Budget. These proposed changes impact a number of aspects of the taxation of stock options and many stock options plans may require amendment as a result.

Under the Income Tax Act, where an employee exercises a stock option a taxable benefit is generally deemed to be received by the employee in the taxation year in which the option is exercised. This benefit is equal to the difference between the fair market value of the shares on the date of acquisition and the exercise price paid by the employee (plus any amount paid for the right to acquire the option.) If certain conditions are met, the employee may be eligible to claim a deduction.

Cashing out stock options