Is a stock option benefit received by an expatriate of a foreign affiliated company subject to Employer Health Tax?
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This interpretation letter was issued based on the specific circumstances or situation of a taxpayer or vendor and the law and tax policy in effect at the time the ruling was issued. Specific facts relevant to your situation may change the application of the tax. In accordance with the Freedom of Information and Protection of Privacy Act, all confidential and identifying information has been removed from this interpretation letter. Please be aware that any statute or policy referred to in this letter may have been superseded. Where a letter contains links to a publication, the link is to our current publication on that subject, regardless of the date that the ruling was originally issued, and the current publication may not be reflective of the information originally provided. In no event shall the Government of Ontario be liable for any damages whatsoever arising out of, or in connection with, the use of the information contained herein.
Interpretation Letter 06-0228, June 2007
We refer to the letter dated XXXXXX regarding the amended T-4 of Mr. A for the year 2004 for an additional amount of $XXXXXX and the Employer Health Tax.
In a telephone conversation on XXXXXX, XXXXXX confirmed that the T-4 of Mr. A was amended at the request of a tax service company who prepares tax returns for all expatriates. The additional amount represents a stock option benefit that was exercised while Mr. A was working in Canada and a bonus paid by an affiliated company located in the USA.
The remuneration paid to individuals who report for work at a permanent establishment of the employer in Ontario, but are on contract from an affiliated company in another country, is subject to EHT. EHT is payable by the Ontario employer on all amounts of salary and benefits taxable under sections 5, 6, and 7 of the Income Tax Act (Canada), which are paid to the employee by both the Ontario employer and the foreign employer.
Stock options, granted to individuals when they were employees of the foreign employer but exercised when they were working on Ontario assignments, fall within the definition of remuneration and are subject to EHT. Similarly, bonus payments by an affiliated company while the employee was working on Ontario assignments are subject to EHT.
