Strategies for Executive Compensation: Design and Tax Issues for a ...

Design Alternatives to Avoid Adverse
Canadian Tax Consequences
• 3-year bonus
– exclusion from the Definition of Salary Deferral
Arrangement
– a plan or arrangement under which a taxpayer has a
right to receive a bonus or similar payment in respect
of services rendered by the taxpayer in a taxation
year to be paid within 3 years following the end of the
year, …
– downside
• delayed receipt by executive
• 3-year limit
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Design Alternatives to Avoid Adverse
Canadian Tax Consequences
(cont’d)
• Employee loan
– taxable benefit with respect to interest may
result
– downside
• cumbersome
• must be repaid if clawback operative
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Design Alternatives to Avoid Adverse
Canadian Tax Consequences
(cont’d)
• Use of a trust
– s. 7 income inclusion by s. 8(12) deduction if
clawback occurs
– downside
• immediate tax without cash unless a loan is also
used
• trust needs to be established
• securities compliance
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