Introduction
Direct employees
Can receive NSO?
✅ Yes!
General taxation
Spread taxed at exercise. Specific regime whereby 50% of spread can be deducted when calculating taxable amount can apply, subject to conditions.
At sale, the sale price minus the FMV of the shares at exercise is taxed as capital gain.
General tax, reporting & legal paperwork difficulty score
🤯
Tax advantages
There’s a tax advantage available when granting stock options to Canadian employees, if some conditions are met.
Effect: 50% of spread can be deducted when calculating taxable amount.
EoR employees
Can receive NSO?
✅ Yes!
General taxation
There are no legal obstacles but the tax treatment of stock options offered to contractors is not clear: it’s difficult to tell how and when stock options are going to be taxed by the Canadian tax authorities (because the gains realized could be considered as either business income or as a capital gain).
It’s unlikely that there would be a taxation at the time of grant.
At exercise: The difference between the FMV of the shares at exercise and the exercise price would normally be taxed at the time of exercise, either as (i) a business income or (ii) a capital gain (which is less heavily taxed compared to business income, because only 50% of the gain is taxed).
At sale: The difference between the sale price and the FMV of the shares at the time of exercise will be taxed, most likely as capital gain.
Perdonal tax advisor assistance is highly recommended.
General tax, reporting & legal paperwork difficulty score
🤯
Tax advantages
-
Contractors
Can receive NSO?
✅ Yes!
General taxation
Spread taxed at exercise, as salary income.
At sale: the sale price minus the FMV of the shares at exercise will be taxed either as capital gain (most likely) or regular income (less likely).
General tax, reporting & legal paperwork difficulty score
🤯 🤯
Tax advantages
There are tax advantages available when granting stock options to Canadian employees, if some conditions are met.
Effect: 50% of spread can be deducted when calculating taxable amount.
It is not sure that this tax advantage can apply when options are granted to an EoR employee (law firms have diverging views on this).
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