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.
Principal Issues: Determining whether an individual is employed or self-employed and determining the proper reporting requirements of the company.
Position: Question of Fact. General Information provided.
Reasons: CRA's guide RC4110, Employee or Self-Employed.
2004-008635
XXXXXXXXXX Luisa Majerus, C.A.
(613) 957-2138
October 18, 2004
Dear XXXXXXXXXX:
Re: Self-Employed and Business Relationship Reporting
This is in reply to your letter dated July 20, 2004, which describes a situation whereby your company is treating individuals hired as self-employed. You have asked for information in order to determine if they are in fact self-employed. In addition, you have asked for information on the proper reporting requirements for amounts paid to the individuals.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
Employed or Self-Employed
Under Canadian tax law, in order to determine if an individual is an employee or self-employed you have to examine and analyze the worker's terms and conditions as they relate to the following four factors: control, ownership of tools, chance of profit/risk of loss, and integration. There is no single conclusive test that can be universally applied to determine whether a person is an employee or is self-employed. If the nature of the relationship between the payer and the worker cannot be determined, a ruling can be obtained from the recipient's local tax services office. For more information please refer to our guide RC4110, Employed or Self-Employed? This guide can be found on our website at http://www.cra-arc.gc.ca/menu/APAP-e.html.
Reporting
Where a self-employed individual is paid commissions and also receives a bonus in the form of store gift certificates, it is our view that the bonus is subject to the same reporting requirements as the commissions. The person making a payment of fees, commissions or other amounts for services to a self-employed individual is required under subsection 200(1) of the Income Tax Regulations to make an information return. The prescribed information return is the T4A Supplementary and Summary Form. For further information see our guide RC4157, Deducting income Tax on Pension and Other Income and Filing the T4A Slip and Summary Form. Please note that if the individual were considered to be an employee, there is a requirement to withhold tax at source and the commissions would be reported on a T4 Slip and Summary Form. For further information see our guide RC4120, Employers' Guide - Filing the T4 Slip and Summary Form. The RC4157 and RC4120 guides can be found on our website at http://www.cra-arc.gc.ca/menu/APAP-e.html.
We trust our comments are of assistance.
Yours truly,
John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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