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Finance Reveals More Details on Stock Option Deduction Cap

Finance Reveals More Details on Stock Option Deduction

Companies may want to revisit their compensation plans in light of upcoming changes

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Many companies may want to revisit their compensation plans in light of upcoming changes to limit the preferential personal tax treatment of employee stock options. Finance has released new legislative proposals to institute a $200,000 annual cap for certain employee stock options that qualify for the stock option deduction as of January 1, 2020.

Finance has also clarified that stock options granted by Canadian-controlled private corporations (CCPCs) and certain "highly innovative, fast-growing companies" will be exempted from the new limit, and is seeking comments from stakeholders on the criteria that these companies must meet to be excluded. Comments on this issue are due by September 16, 2019.

Now that Finance has released proposed legislation to enact the annual cap, affected companies may want to consider the timing of granting stock options and other stock-based awards before the new rules come into effect. In addition, companies should prepare to implement tracking and monitoring for stock option grants and the application of the cap, to help differentiate the number of options eligible for the stock option deduction.

Download this edition of the TaxNewsFlash to learn more.

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