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ARTICLE · 19 MARCH 2010

Canada’s 2010 Budget Affects Options And Stock Appreciation Rights

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Canada’s 2010 Budget released March 4, 2010 makes several significant changes to the taxation of options and stock appreciation rights (SARs). In general, the new regime takes effect after 4:00 p.m. (EST) on March 4, 2010.

CanadaEmployment and HR
Christina Medland
Christina Medland
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Canada's 2010 Budget released March 4, 2010 makes several significant changes to the taxation of options and stock appreciation rights (SARs). In general, the new regime takes effect after 4:00 p.m. (EST) on March 4, 2010.

First, the 2010 Budget eliminated the limited deferral that allowed an optionholder to defer tax on the exercise of an option to acquire publicly listed shares until the year in which the shares were sold (subject to an annual limit of $100,000); so options are now taxed at the time of exercise. The deferral for options to acquire shares of Canadian-controlled private corporations (CCPCs) was retained.

The 2010 Budget provides relief for employees who made the $100,000 deferral election and experienced financial hardship because of a decline in the value of the optioned shares: the budget provides a new election that limits the tax liability to the value of the optioned shares.

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