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Proposed Changes to Tax Treatment of Employee Stock Options No Longer Coming into Force January 1, 2020

December 20, 2019

On December 19, 2019, the federal government announced that proposed changes to the tax treatment of employee stock options will not come into force on January 1, 2020.

As noted in our previous Blakes Bulletin: Proposed Changes to Stock Option Tax Rules, on June 17, 2019, the federal government proposed changes to the tax treatment of stock options to limit the availability of the 50 per cent deduction that can often be available on employee stock option benefits. This deduction, if available, results in stock option benefits being taxed at effectively the same rates as capital gains. The proposed changes would limit the availability of the deduction for employees of "large, long-established, mature firms" and were previously proposed to come into effect for options granted on or after January 1, 2020. 

A consultation period that ended on September 16, 2019, generated many comments from interested parties, none of which have, to date, been taken into account in any publicly released changes to the proposed rules. Also, draft regulations describing what it means to be a "start-up, emerging or scale-up company" and, thus, exempt from these rules have not yet been released.

The federal government indicated that it is reviewing the input received and that further details, including a new coming-into-force date, will be included in its 2020 Budget. The announcement suggests that the coming-into-force date will, as was the case with proposals in this year's budget, be delayed until sometime after budget day.

For further information, please contact any member of our Pension, Benefits & Executive Compensation or Tax groups.