This is where it gets confusing in Canada, and people get bitten. It DOES work this way in Canada, - when you exercise an employee stock option and convert it

This is where it gets confusing in Canada, and people get bitten. It DOES work this way in Canada, - when you exercise an employee stock option and convert it to stock, you have an immediate tax obligation based on the difference between your option value and the current market value (specified somehow, I forget). That is considered income, and you are liable for it. If it's going to be considered income, then the employer SHOULD pay the witholding tax just as with regular income, because we're taxed as if it's regular income. I wish employers had done this - mine chose not to (they weren't required to) - and the burden was on me to know that it would be considered income nad I had to pay it. (So yes, that means when I exercised it I sold it all at the same moment, put half away in savings for tax time, and did whatever with the rest.)