Canada Tax Treatment of Share Matching

[akumar]

I recently relocated from the USA to Canada.

Out company has a share matching program where shares purchased through the program are matched by the company after a 4-year vesting period. My next tranche is coming due soon. Since I transferred from the USA to Canada in the last year of the vesting, my company has advised me that the payroll tax deductions will be handled as per the following example:

Example:
Company share match: $40K in shares
Vesting period in the USA: 3 years
Vesting period in Canada: 1 year

Both Canadian and US payroll will administer a tax calculation (though selling matching shares) before depositing the remaining matching shares into my brokerage account:

US Payroll: Will sell enough shares to cover tax as follows:
(3/4 vesting years) × $40K × 27% US Tax Rate

Canadian Payroll: Will sell enough shares to cover tax as:
$40K × 53% Canadian Tax Rate

The Canadian calculation doesn’t make provisions for the vesting period completed outside Canada.

Our compensation team has advised that this potential double taxation stems from Canada’s requirement to report the full taxable benefit up front, and that I’ll recover this at tax filing time. I will get both a W2 and T4, so I’m wondering how the income will be reported on my T4.

How will CRA distinguish that this wasn’t fully Canadian employment income, and ensure appropriate treatment?