(Bloomberg) -- (Bloomberg) - Canada is reining in a tax break on employee stockoptions by introducing a cap that it expects will impactexecutives of major, established companies.
Stock options in Canada currently get preferential taxtreatment, with only half the benefit taxed as income, similarto capital gains. The government will cap the annual use of thatbenefit at C$200,000 ($150,000) for employees of “large, long-established, mature firms,'' according to budget documentsreleased Tuesday. The cap wouldn't apply to start-ups and won'timpact the vast majority of people receiving stock options.
The stock option benefits “disproportionately accrue to a verysmall number of high-income individuals,'' according to thebudget. Canada had 2,330 people with incomes over C$1 millionwho claimed stock option deductions in 2017, and the averageclaim was C$577,000, the government said.
That deduction by those high-income earners cost the governmentC$1.3 billion in revenue, accounting for about two-thirds oftotal deductions.
“The government does not believe that employee stock optionsshould be used as a tax-preferred method of compensation forexecutives of large, mature companies,'' according to thebudget.
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