In 2010-0356401E5 (released last week), the Canada Revenue Agency (CRA) Rulings Directorate considered a case where a Canadian company in the group (Canco) reimbursed the foreign parent (public) company in the group (Parent) in respect of both options and shares awarded by Parent to Canco’s employees, under the group’s long term employee incentive plan. The amount of Canco’s reimbursement was equal to the fair value of the shares or options awarded at the date of grant (net of any exercise price payable by the employee). Canco did not deduct this reimbursement in computing its income (s. 7(3)(b)). The Rulings Directorate said that Canco’s reimbursement generally could not be considered “a benefit” conferred on Parent, for purposes of the withholding tax provisions (s. 15(1), s. 246(1)(b), and s. 214(3)(a)). However, upon audit, the CRA may review the method used to compute the fair value of the option or share awards.