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ARTICLE · 03 JULY 2019

Finance Releases Employee Stock Option Proposals

McCarthy Tétrault
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As foreshadowed in the 2019 federal budget (Budget 2019), on June 17, 2019, the Department of Finance released draft legislation to limit the beneficial tax treatment

CanadaFinance and Banking
McCarthy Tetrault LLP
McCarthy Tetrault LLP
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As foreshadowed in the 2019 federal budget (Budget 2019), on June 17, 2019, the Department of Finance released draft legislation to limit the beneficial tax treatment generally available to employees on an exercise or cash-out of their stock options (the Stock Option Proposals). The federal government stated in Budget 2019 that the proposed changes would become effective upon the release of the legislative proposals.  However, the Stock Option Proposals provide that the proposed changes will only apply to stock options granted on or after January 1, 2020.  This resolves uncertainty regarding the effective date of the new measures. 

The Stock Option Proposals will not apply to employee stock options granted by Canadian-controlled private corporations (CCPCs) or other employers that satisfy certain yet-to-be-specified "prescribed conditions". The prescribed conditions are intended to exempt non-CCPCs that are "start-ups, emerging, or scale-up companies". The Department

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