Employee stock option owned by a non-resident

Tax Topics
1

Just to confirm, an employee stock option exercised by a non-resident receives the same tax treatment as for a resident. For example, the security option benefit for a non-resident is also deferred until the actual sale?

2

I believe so. Same treatment as outlined under Section 7(1) for residents, assuming the benefits were acquired from services performed in Canada or at a time when the non-resident was a resident for tax purposes (Section 115)

3

This maybe very tricky, I don’t think you can be an employee of a Canadian corp and be a non-resident at the same time. Lots of ppl seem to think, file a tax return, indicating non resident status is sufficient to be treated as non resident which is not the case. If this is employee benefit, same cpp, ei tax deduction will apply, non resident, working for Canadian company, follow the same deduction, if it’s the other way, non resident withholding will need to be held by the Canadian company and remit depending on tax treaty

4

Oh I meant a former employee who received the stock option as a resident and later became a non-resident before exercising

5

As you say, it can be tricky, however, you CAN be a nonresident and an employee of a Canadian company and working in Canada at the same time. Follow the rules, and as pointed out, read and interpret the applicable Tax Treaty, which will override the ITA.

6

Not going into details, employee stock option deferral is available for CCPC, and the company would be the one that need to make that determination anyways

7

(b) As a non-resident, the individual is taxable in Canada under subsection 2(3) as determined under subparagraph 115(1)(a)(i) (income from employment) in respect of any benefit received when the stock option is exercised, because the employment for which the stock option was granted was performed in Canada.

With respect to (b) above, the non-resident individual may be entitled to relief from Canadian income taxation under a relevant tax convention between Canada and the individual’s country of residence at the time the stock option is exercised. In addition, a non-resident filing a return under subsection 115(1) may be entitled to a deduction under paragraph 110(1)(d) or (d.1) in computing taxable income.

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