Government Delays the Cap on the Employee Stock Option Deduction

 In Alerts, Wolters Kluwer

The government launched a consultation on proposed changes to the employee stock option deduction rules on June 17, 2019. The consultation closed on September 26, 2019, and the government is reviewing all the input it received. When the proposals were first announced, the technical backgrounder stated that the government only intends for the $200,000 deduction cap to apply to large, long-established, mature firms. On the other hand, the cap will not apply to growing firms without significant profits. Since the announcement, the government has been accepting consultation submissions on what types of firms ought to be excluded from the deduction limitation.

Minister of Finance Bill Morneau provided an update on December 19, 2019. The proposed amendments were originally set to apply as of January 1, 2020, but Morneau stated that the rules will not come into force on that date. Rather, the government will announce further details on how it intends to move forward with these proposals in the 2020 Federal Budget. According to the news release from the Department of Finance, the new coming-into-force date will provide stakeholders sufficient time to review and adjust to the new rules.

For an overview of the rules and proposed changes, see The Taxation Of Employee Stock Options And Proposed Changes, by Joseph Frankovic.

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