6 March 2012 T.I. 2012-0433161E5 - Hong Kong Scheme

CRA Tags
9 3 56(1)(u)
Text of Severed Letter

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: Whether a one-time payment received by a Canadian resident from the Hong Kong Government "Scheme $6,000" should be included in the taxpayer's calculation of taxable income.

Position: No.

Reasons: The "Scheme $6,000" one-time payment from the Hong Kong government is not income from a source, nor is it taxable under a specific provision of the Act. The one-time payment appears to be a windfall in accordance with the factors listed in IT-334R2.

Gillian Godson

March 6, 2012


Re: Hong Kong Scheme $6,000

We are writing in reply to your letter of January 6, 2012, concerning whether you are required under the Income Tax Act (the "Act") to include an amount you will receive from the Hong Kong Government in the calculation of your taxable income.

In your inquiry you have stated that as a former resident of Hong Kong you are entitled to receive a payment of HK$6,000 from the Hong Kong Government. You have also stated that the payment is not taxable for Hong Kong tax purposes. The payment is in respect of "Scheme $6,000", which the Hong Kong Government has publically announced proposes to provide a sum of HK$6,000 to each Hong Kong Permanent Identify Card (HKPIC) holder who has attained the age of 18 or above. According to the Government of Hong Kong the payment is from a surplus of government funds and the purpose of "Scheme $6,000" is to "leave the wealth with the people".

As a resident of Canada, you are taxed on your worldwide income. In general, the Act provides that a taxpayer include income from all sources in the calculation of taxable income. There are also a number of provisions of the Act that include in taxable income certain types of income that are not income from a source.

On the other hand, an amount may constitute a non-taxable windfall for the person receiving it. The factors that are considered in the determination that a particular receipt is a windfall include the following:

(a) the taxpayer had not enforceable claim to the payment,
(b) the taxpayer made no organized effort to receive the payment,
(c) the taxpayer neither sought after nor solicited the payment,
(d) the taxpayer had no customary or specific expectation to receive the payment,
(e) the taxpayer had no reason to expect the payment would recur,
(f) the payment was from a source that is not a customary source of income for the taxpayer,
(g) the payment was not in consideration for or in recognition of property, services or anything else provided or to be provided by the taxpayer, and
(h) the payment was not earned by the taxpayer as a result of activity or pursuit of gain carried on by the taxpayer and was not earned in any other manner.

Based on the information provided, we are of the view that the one-time payment you are entitled to receive from the Hong Kong Government's "Scheme $6,000" is not income from a source, nor is it taxable under a specific provision of the Act. In that regard, it is our view that the payment would be considered a windfall. As such, you are not required to report the amount in the calculation of income for Canadian tax purposes.

We trust that these comments will be of assistance.

Yours truly,

Terry Young, CA
for the Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch