The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities.

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More comprehensive information for this country and its work relationships is available on Easop.

Yes, you can grant non-qualified stock-options (NSO) to employees in Canada.

In a nutshell, what does taxation look like?

• At grant 👉 No taxation at grant.
  
  
• At exercise 👉 The spread is taxed as salary income. There is a possibility of reducing the taxable amount by half, subject to the fulfilment of certain conditions and possible limitations.
  
  
• At sale 👉 The difference between the sale price and the fair market value of the shares at the time of exercise may be taxed as capital gain.

Are there tax advantages you should consider?

There are potential tax advantages available when granting stock options to Canadian employees subject to certain conditions and limitations.

Yes, you can grant non-qualified stock-options (NSO) to EoR employees in Canada.

In a nutshell, what does taxation look like?

• At grant 👉 No taxation at grant.
  
  
• At exercise 👉 The spread is taxed as salary income. There is a possibility of reducing the taxable amount by half, subject to the fulfillment of certain conditions and possible limitations.
  
  
• At sale 👉 The difference between the sale price and the fair market value of the shares at the time of exercise may be taxed as capital gain.

Are there tax advantages you should consider?

There are potential tax advantages available when granting stock options to Canadian employees subject to certain conditions and limitations.

Yes, you can grant non-qualified stock-options (NSO) to contractors in Canada.

Note that granting stock options to contractors could increase the misclassification risk (i.e. the contractor relationship being requalified as an employer-employee relationship, with all tax consequences that can go with it). This will never be the only factor though, what counts primarily for determining the degree of misclassification risk are factors relating to the modalities of the services performed (control over the contractor’s work, exclusivity, term of the services, etc.).

In a nutshell, what does taxation look like?

Generally, taxation is not entirely clear as stock options have been initially regulated for employees only, and taxation often depends on the legal form chosen by the contractor to perform their activities.  

• At grant 👉 Normally no taxation at 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.
  
  
• 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.  

What you should know if the grantee works via a personal management company.

In Canada, it may happen that contractors work via personal management companies. A personal management company is a corporate vehicle used in some countries outside of the United States, usually set up for limitation of liability, personal accounting and tax purposes, owned and managed by the same natural person and through which such person provides services as a contractor/freelancer.

If a contractor works via a personal management company it is recommended for the management company to receive and retain the stock options.