Earlier this year, the Canadian government tabled a Notice of Ways and Means Motion with proposed amendments to the Income Tax Act (Canada) to implement the employee stock option proposals from the 2019 Federal Budget. The proposals were to apply to employee stock options granted by corporations and mutual fund trusts on or after January 1, 2020.
Under the Income Tax Act (Canada), when an employee exercises an employee stock option and acquires shares, the employee realizes a taxable employment benefit equal to the excess of the value of the shares at the time of acquisition over the exercise price paid for the shares.
Many were hoping for tax reductions in Budget 2019 that would help make Canada more competitive. With Canada's top marginal tax rates described by some analysts as "punitively high," and with the Canadian economy sliding to an annualized rate of growth of only 0.4 per cent in the fourth quarter, there are no proposed changes to the tax rates for individuals or corporations.
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