Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: how are costs to develop web site to be treated?
Position: component parts - ie: cost of software, hardware and misc. costs
Reasons: make up of web site encompasses several inputs.
May 5, 2000
Ottawa Tax Services Office Headquarters
Verification and Enforcement Division Partnerships Section
Tax Avoidance Section S. Tevlin
280 Slater Street, 15th floor
Attention: Denis Dionne
2000-001714
Tax Treatment of Website Development Costs
We are writing in response to your memorandum dated March 24, 2000, wherein you requested our opinion with respect to the tax treatment of expenditures made by a taxpayer to develop a website on the Internet.
In general terms a website is an electronic creation that enables a business, inter alia, to advertise, sell its products and/or services and to provide information about its business to the public through the Internet. A website is not permanent and can be modified, taken down and rebuilt.
Our understanding is that generally, labour costs would be the predominant cost of developing a website. Such labour would be required to design and develop software to carry out the site's functions. Additional computer hardware may or may not be required. Costs may also include registration fees and payment to an Internet provider who will furnish an Internet address and connections to various search engines.
It is our opinion that for tax purposes the component parts of the website development should be classified individually as to income or capital account.
We would expect that any equipment required to operate the website would be considered "general purpose electronic data processing equipment", as that term is defined in Regulation 1104(2) of the Income Tax Regulations (the "Regulations"). If the equipment meets this definition it would be capitalized and included in class 10(f) of Schedule II of the Regulations. If it is not general purpose data processing equipment it would most likely be included in class 8(i) of Schedule II.
Software that is created to implement and operate the website will be either systems software or applications software. Systems software as defined in Regulation 1104(2) would be included in class 10(f) of Schedule II while application software would be included in class 12 of Schedule II.
We trust our comments will be of assistance to you.
Paul Lynch
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000
Email this Content