CANADA: Tax withholding on stock option benefits: Will you be ready on January 1, 2011? - CanadianSecuritiesLaw.com

Tax withholding on stock option benefits: Will you be ready on January 1, 2011? - CanadianSecuritiesLaw.com (press release)

Andrea Boctor and Ramandeep Grewal    

Beginning January 1, 2011, virtually every stock option exercise by
an employee or director will trigger employer tax withholding and
remittance requirements. Stemming from the March 2010 Federal Budget, new rules were introduced into the Canadian Income Tax Act
earlier this fall which "clarify" that, effective as of the new
year, source deduction requirements apply to stock option
benefits. These and other proposed amendments relating to taxation of
stock options are summarized in detail in our related Tax Update. The
change in policy in respect of withholding and remittance for stock
options brings the Canadian tax regime essentially in line with the
regimes of other countries, including the U.S. and U.K.

These developments impact both employers and those receiving stock
options or similar compensation. Every corporation and every mutual fund
trust that sponsors stock option plans to which these rules apply
should review the existing terms of its plans, and related
administrative procedures, to determine whether tax withholding and
remittance can be accommodated in accordance with Canada Revenue Agency (CRA) rules. For public companies, existing stock option plans and agreements should also be carefully reviewed to determine

more at link above