Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Does a non-resident individual have to include any stock option benefits in his Canadian income where the options were granted by a U.K. employer in respect of the individual's employment in the U.K.?
Position: No.
Reasons: We have generally taken the position that the stock option benefit relates to the period when the options are granted and not when they vest.
XXXXXXXXXX 2000-005840
M. P. Sarazin, C.A.
Attention: XXXXXXXXXX
January 19, 2001
Dear Sirs:
Re: Stock Option Granted While a Non-Resident
This is in reply to your facsimile of November 27, 2000, requesting our views regarding the reporting of stock option benefits in respect of a non-resident individual.
In your letter you have outlined an actual fact situation related to completed transactions. As noted in Information Circular 70-6R3 dated December 30, 1996, issued by the Canada Customs and Revenue Agency (the "Agency"), this directorate can only provide advance income tax rulings in respect of specific proposed transactions. Copies of information circulars and interpretation bulletins are available from your local tax services office or on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. We must advise you that the review of completed transactions falls within the responsibility of tax services offices which, in the case of non-residents, is the International Tax Services Office. Consequently, we can only provide you with the following general comments.
Interpretation Bulletin IT-193 titled "Taxable income of individuals resident in Canada during part of a year" and its Special Release (hereinafter collectively referred to as IT-193) provide the Agency's general views with respect to the taxation of amounts earned by an individual who ceases to be a resident of Canada during a taxation year. Paragraph 4 of IT-193 states that section 114 of the Income Tax Act (the "Act") applies to determine the taxable income of an individual who was resident in Canada during part of the year only and who, during the other part of the year was not resident, not employed and not carrying on business in Canada. Paragraph 5 of IT-193 then describes how the income for such a person would be computed for purposes of the Act. Under section 114 of the Act, an individual's taxable income is generally his or her world income during the period in the year when the individual was resident in Canada and the income pursuant to section 115 for the portion of the year that the individual was not resident in Canada.
Where an individual exercises a stock option during that part of a taxation year that he or she is resident in Canada, the benefit from the stock option would be included in the individual's taxable income for purposes of the Act. Where an individual exercises a stock option in a taxation year after he or she has ceased to be resident in Canada, the individual will be required to include the benefit in income to the extent it is attributable to services rendered in Canada pursuant to subsections 2(3) and 115(1)(a)(i) of the Act, subject to the provisions of any tax convention or agreement.
Generally, the stock option benefit relating to the options granted to an individual while he or she is employed by a foreign employer while the individual was resident and employed only in the foreign country that were exercised after the individual ceased to be resident in Canada will not be included in the individual's income under subparagraph 115(1)(a)(i) of the Act because the entire stock option benefit is considered to be attributable to the individual's duties of employment performed in the foreign country for the foreign employer in the year the stock option was granted. Stock option vesting rights that may be attributable to a short period the individual was resident in Canada do not have any impact on this tax treatment.
We trust the above comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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