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Canada: Finance proposes changes to stock-option deduction cap

Canada: Proposed changes to stock-option deduction cap

The Department of Finance released legislative proposals that, if enacted, would impose a $200,000* annual cap for certain employee stock options that qualify for the stock-option deduction as of 1 January 2020.


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Finance clarified that stock options granted by Canadian-controlled private corporations (CCPCs) and certain “highly innovative, fast-growing companies” would be exempted from the new limit. Comments from stakeholders on the criteria that companies would need to satisfy to be excluded have been requested. Comments are due by 16 September 2019.

$ = Canadian dollar

KPMG observation

Because of these proposed changes, companies may want to revisit their compensation plans to limit the preferential individual (personal) tax treatment of employee stock options.

Affected companies may want to consider the timing of granting stock options and other stock-based awards before the new rules are effective. In addition, companies may want to prepare to implement tracking and monitoring for stock-option grants and application of the proposed cap, to help differentiate the number of options eligible for the stock-option deduction.

Read a June 2019 report prepared by the KPMG member firm in Canada

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