CRA rules on Canco/US Pubco RSU recharge agreement

An indirect Canadian subsidiary (Canco) of a US public company (Parent) is proposing to start reimbursing Parent for the value of shares issued by Parent to Canco employees when RSUs issued to them vest.  Such reimbursements would not give rise to a taxable benefit for the reimbursements of RSUs awarded after the effective date of the new "recharge agreement."  However, in the case of RSUs which had not yet vested by such effective date, CRA would only rule that there was no benefit respecting reimbursements for increases in the value of such RSUs after the effective date.

This is similar to some earlier interpretations (e.g., 990259 and 2000-003491), and contrasts with some more recent interpretations (2009-0321721I7 and 2010-0356401E5) respecting reimbursement by the subsidiary for the Black-Scholes value of options at the time of grant.

Neal Armstrong.  Summary of 2012 Ruling 2010-0391281R3 under s. 15(1).