Generally, tax at payment.
Taxable amount is the amount of the cash payment.
However, depending on the award terms, salary deferral arrangement rules may apply, in which case awards may be taxed at grant.
Taxable amount would be the amount of cash payment as of grant.
Generally, yes, because subsidiary bears the cost of award.
Written agreement recommended.
Income Tax:
Yes.
Social Insurance Contributions:
Yes, but subject to annual contribution ceiling. If applicable, employer has to withhold employee's contributions.
Provincial payroll taxes levied on employers may be payable on award income.
Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc.
There is also a risk employees could gain a right to continued cash-settled awards during employment if awards are granted regularly, giving rise to breach of contract claims or constructive dismissal claims if the awards are a significant part (10% or more) of the employee's overall compensation.
Further, according to recent case law, employees may be entitled to vest in awards through notice period, even if there is language in award agreement to the contrary.
As of 1 June 2022, award documents must be provided to employees in Quebec in French.
Please contact Baker McKenzie for details.