CRA indicates that an RSU award as signing bonus or inducement to move, or as an award for a current performance accomplishment. might not engage the SDA rules

2020-0864831I7 found that full-value restricted share units (“RSUs”) granted early in the calendar taxation year of the employer (the “Grant Year”) were considered to be in respect of services in the previous year, so that such award came within the salary deferral arrangement (SDA) definition, and would not be excluded under para. (k) of the SDA definition if the RSUs were settled in the third year after the Grant Year, i.e., more than three years after the end of the year in which the services had been rendered. In further commenting on this position, CRA now stated:

In tandem with our general and longstanding presumption that a grant of full-value RSUs are in respect of the grantee’s past services, the relatively short passage of time between Canco’s fiscal year end and the Grant Date increased the likelihood that the grant of RSUs would be in respect of past services rendered by the grantee in the year prior to the Grant Year.

However, CRA acknowledged that, notwithstanding this presumption, a grant of full-value RSUs could be considered to be solely in respect of services rendered after the grant date (i.e., only for future services), giving as potential examples, a signing bonus, and a bonus for a current employee agreeing to an overseas assignment.

CRA also indicated that even a grant of full-value RSUs relating to past services might not engage the SDA rules, for example, potentially a grant made in recognition of a performance accomplishment (such as a large sale) that occurred earlier in the Grant Year.

Neal Armstrong. Summary of 7 March 2022 External T.I. 2021-0895571E5 under s. 248(1) – SDA and SDA, para. (k).