STOCK OPTION BENEFIT – WITHHOLDING REQUIREMENTS
At the time when a stock option is granted to an employee, no benefit is recognized (Paragraph 7(3)(a)). When the option is exercised, a benefit is recognized unless the employer is a CCPC dealing at arm’s length with the employee. In those cases, the benefit is generally deferred until the year in which the share is disposed of (Subsection 7(1.1)).
An employee’s stock option benefit is generally subject to withholding and remittance requirements (Subsection 153(1.01)). In a January 3, 2018 Technical Interpretation (2017-0709811I7, Pietrow, Victor), CRA noted that where the income deferral (Subsection 7(1.1)) is applicable, no withholding is required in respect of the disposed stock (Paragraph 153(1.1)(b)).
For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 441