The correspondent noted the position in 2020-0864831I7 that full-value restricted share units (“RSUs”) granted early in the calendar taxation year of the employer (the “Grant Year”) were considered to be in respect of services in the previous year, so that such award came within the salary deferral arrangement (SDA) definition, and would not be excluded under para. (k) of the SDA definition if the RSUs were settled in the third year after the Grant Year, i.e., more than three years after the end of the year in which the services had been rendered. In this regard, CRA now stated:
In tandem with our general and longstanding presumption that a grant of full-value RSUs are in respect of the grantee’s past services, the relatively short passage of time between Canco’s fiscal year end and the Grant Date increased the likelihood that the grant of RSUs would be in respect of past services rendered by the grantee in the year prior to the Grant Year.
CRA also acknowledged that a grant of full-value RSUs could be considered to be solely in respect of services rendered after the grant date (i.e., only for future services), stating:
[I]t is not inconceivable that a signing bonus for a new employee would be solely in respect of services to be rendered in the year in which the relevant employment agreement was executed. A similar conclusion may also apply to a bonus awarded to an existing employee for accepting an overseas assignment. …
Even if a grant of full-value RSUs was related to past services, it is also still possible that those past services were rendered solely in the Grant Year. Full-value RSUs awarded to an employee might be considered to relate solely to services rendered in the Grant Year if, for example, the facts and documents established that the grant was made in recognition of a performance accomplishment (such as a large sale) that occurred earlier in the Grant Year.