In an earlier post, we highlighted that Canada’s newly-elected Liberal government plans to change the taxation of stock options by capping the available amount of the stock option deduction. At that time, few details had been made public with respect to the cap and many holders of vested stock options were considering the possibility of exercising them in order to lock in the current favourable tax treatment.
Today, in the course of delivering the Liberal government’s first fiscal update, Finance Minister Bill Morneau publicly announced that any changes that the Canadian government makes with respect to the tax treatment of stock options will grandfather existing options. Specifically, Mr. Morneau stated that “any decision we take on stock options will affect stock options issued from that date forward”, while “any stock options that have been issued prior to that date will be under that taxation regime that was in effect prior to that date.” We expect the date could be as early as the Throne Speech on December 4 or when the budget is released in early 2016. He added that this information “should relieve those Canadians who have that concern from taking actions that would be inappropriate.”
These public statements are a welcome and timely clarification for Canadian executives considering how to best address the government’s stated plans, including those who were contemplating the possibility of exercising their vested options before the end of the year.