in Canada, Employee stock options, when exercised, are considered income for that year, and are supposed to be reported by your employer as such, and are taxed

in Canada, Employee stock options, when exercised, are considered income for that year, and are supposed to be reported by your employer as such, and are taxed as such. Note this isn't a capital gains tax - and the bad part is there isn't necessarily any income - the value you are taxed t is the fair market value or closing market value, I forget, but it's a simple calculation, based on the difference between the value of the strike price on your options compared to the market. So if you have 10,000 shares at $10, and the market is at $10 or less, and you were vested, you could exercise all those shares, converting them to stock, and there would be no additional income tax. If the stock is now at $20, the tax man would view your conversion of those options into stock as a straighht up $20,000 gain from employment. Generally the move in this situation is to have your broker validate the paperwork with the company, and then ONLY exercise stock at the same moment you are ready to sell it - the broker will handle the whole transaction for you, even short the stock and then use yours to make up for it, whatever. This minimizes your exposure. Employee Stock Options by thesmselves (in Canada) carry no liability. You can ignore them if you like. You also have the option of, with some paperwork, delaying that tax burden until you actually SELL the stock. IF you did that, you'd still have the same $20k added to your income in the year you sold (you deferred, right?). You still pay capital gains on the difference between the market price on the day you bought (not the strike price on the options, which was what you actually paid) and the selling price - but that's taxed as capital gains. This situation can protect you if you plan to never sell or the company goes bankrupt, if you keep your paperwork and ducks in a row - though there is another hitch if you plan to work and live outside the country (become non-resident for tax purposes) - in this case all kinds of tax obligations come smacking down on you as you are leaving hte jurisdiction. (THe upside, of course, is canadians are only taxed based on residency, not citizenship - so if we live and work abroad for real, not just a short job, but actually leave and don't have any fixed plans to come back, we don't pay or even report income to teh tax authorities in canada) Disclaimer: My knowledge is a decade old - I suspect some of this may have changed. There was quite a bit of uproar, not about the tax itself, but the specifics that it was immediately considered employment income and that you had an immediate tax obligation. I think something* has changed, not sure what.