Tax on spread at exercise. A special regime provides that 50% of the spread can be deducted when calculating the taxable amount, provided certain requirements are met. For Quebec provincial income tax purposes, this deduction is only 25% unless additional requirements are met. For option agreements entered into on or after 1 July 2021, the 50% deduction is subject to a cap of C$200,000 vesting per year (with certain exceptions). Companies may elect to grant options that do not qualify for the 50% / 25% deduction.
Please contact Baker McKenzie for details.
Tax on sale. Taxable amount is one half of any capital gain.
Unavailable for stock-settled awards unless the company satisfies a number of specific requirements including retaining the discretion to settle in either cash or shares and the subsidiary reimburses the parent.
However, if the company has the discretion to settle in cash, the 50% deduction will not be available to employees.
For option agreements entered into on or after 1 July 2021, a tax deduction may be available for options that do not qualify for the 50% deduction.
Please contact Baker McKenzie for details.
Income Tax:
Yes.
Social Insurance Contribution:
Yes, but subject to annual contribution ceiling. If applicable, employer has to pay employer contributions and withhold employee's contributions.
Provincial payroll taxes levied on employers may be payable on award income.
Provincial laws apply. In all provinces, most plans will be exempt from prospectus/dealer registration requirements.
Discretionary relief may be required in certain instances depending on specific plan terms.
Generally not, provided employee signs agreement acknowledging discretionary nature of the plan.
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.