Those individuals who were preparing for the Jan. 1, 2020 implementation of the revised stock option rules will have to wait a little longer. The Department of Finance Canada announced on Dec. 19, 2019 that the effective date of the revised employee stock option rules will be delayed.
The revised employee stock option rules, as currently proposed, would result in the following changes:
- A $200,000 annual limit will apply on employee stock option grants (based on the fair market value of the underlying shares at the time the options are granted) that can receive tax-preferred treatment under the current employee stock option tax rules.
- Employee stock options granted by Canadian-controlled private corporations (CCPCs) will not be subject to the new limit.
- In recognition of the fact that some non-CCPCs could be start-ups, emerging or scale-up companies, those non-CCPCs that meet certain prescribed conditions will also not be subject to the new limit.
- Employee stock options above the limit will be subject to the new employee stock option tax rules.
The delay in the implementation date allows the government time to review the submissions provided by stakeholders during the consultation period.1 This time is needed to properly draft the prescribed conditions excluding start-ups, emerging or scale-up companies from these new rules.
In the Dec. 19 announcement, the Department of Finance Canada stated it will announce details on how it intends to move forward in Budget 2020. The new coming-into-force date will also be announced at this time, which is intended to provide individuals and businesses time to review and adjust to the new rules.
- The consultation period took place between June 17, 2019 and Sept. 16, 2019, where the government was seeking stakeholder input on the characteristics of companies that should be considered start-up, emerging and scale-up companies for the purposes of prescribed conditions.
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