November 20, 2015, No. 2015-34. At a press conference today Finance Minister Bill Morneau said that the new federal government will provide grandfathering for existing stock options as part of its campaign promise to cap the amount that is eligible for the 50% stock option deduction. At the press conference about Canada’s Economic and Fiscal Update, the Minister said that the potential measure on stock options will only take effect once the changes have been announced.
The Finance Minister said that the government will be reviewing the stock option measures in the next few months. Although the full details of the new stock option regime are not currently known, many affected taxpayers have been wondering whether they should exercise their stock options now and what that would mean for them. Although today’s announcement indicated that stock options issued before changes are announced will be grandfathered, the federal top marginal tax rate is still expected to increase by 4% in 2016 and as such taxpayers could save 2% federal tax by exercising in 2015. Each stock option plan and situation is unique, so it is important that you understand the variables that should be considered in making any decisions about stock options.
A stock option plan usually gives an employee of a corporation the right to purchase shares of the corporation at a given exercise price. This exercise price may be above or below the market price of the shares at the time the option is granted.
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Information is current to November 20, 2015. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.