Trudeau Tightens Tax Rules on Stock Options and Mutual Funds
Trudeau Tightens Tax Rules on Stock Options and Mutual Funds
(Bloomberg) -- (Bloomberg) - Canada is reining in a tax break on employee stock
options by introducing a cap that it expects will impact
executives of major, established companies.
Stock options in Canada currently get preferential tax
treatment, with only half the benefit taxed as income, similar
to capital gains. The government will cap the annual use of that
benefit at C$200,000 ($150,000) for employees of “large, long-
established, mature firms,’’ according to budget documents
released Tuesday. The cap wouldn’t apply to start-ups and won’t
impact the vast majority of people receiving stock options.
The stock option benefits “disproportionately accrue to a very
small number of high-income individuals,’’ according to the
budget. Canada had 2,330 people with incomes over C$1 million
who claimed stock option deductions in 2017, and the average
claim was C$577,000, the government said.
That deduction by those high-income earners cost the government
C$1.3 billion in revenue, accounting for about two-thirds of
total deductions.
“The government does not believe that employee stock options
should be used as a tax-preferred method of compensation for
executives of large, mature companies,’’ according to the
budget.
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