Anonymous asked in Business & FinanceTaxesCanada · 8 years ago

My company wants me to invest in a share-matching plan, but will I get nailed by capital gains tax?

I work for a multinational with a branch in Canada. Right now, we're being offered a free stock if we keep an X number of stocks for Y number of years. I've never taken part in a share-matching plan before, but my company's stock seems fairly strong and constantly on the rise.

The thing is...when I finally decide to buy out, how hard will I be hit by the capital gains tax (which, as I understand it, will be required to be paid on such an investment)? According to Wikipedia, it's about 50%! What's the nitty-gritty on this?

3 Answers

  • Sparky
    Lv 6
    8 years ago
    Favorite Answer

    Capital gains in Canada are half-taxed. This means that if you have a gain of $1,000, you pay taxes on $500. The $500 would be added to the rest of your taxable income, and would be taxed at the proper rate for the combined taxable income.

    This doesn't mean that tax will be equal to half of the profit. It means that half of the profit will be subject to income tax.

    In the case where the company gives you the stock at zero cost, or at any cost better than the market value, there is an additional tax consideration. The difference between the stock price and the price you pay is considered a taxable benefit, and the value of the benefit would be added to your T4 income in the year that the stock is given to you. There is a related deduction so that only half of the taxable benefit is taxed. But the point is, this creates a tax liability immediately when you get the stock, regardless of whether the stock is sold.

    You should consider sitting down with an independent financial adviser and an accountant. But if the stock is as strong as you say, this can only be good for you in the long run.

  • ?
    Lv 7
    8 years ago

    Goodness gracious, you are being offered FREE money and you are worrying about capital gains that may or may not even occur.

    Take the share matching and stop thinking so far ahead.

    Since the shares you get are free you still profit even with paying 50%

  • wg0z
    Lv 7
    8 years ago

    who cares? if someone is going to give give you a dollar, does it matter if the govt gets half later on?

    stock purchase plans that involve employer match are almost always a good idea...just make sure you're smarter than all the poor Enron idiots that never had anything else. one of the very cases where a stock-heavy pension/retirement scenario went completely bad, but proof that it happens. Diversify!

Still have questions? Get your answers by asking now.