Kenny – Tax Court of Canada finds that foreign government assistance scuppered the “substantially all” test in s. 118.94 (which did not violate a non-discrimination Treaty Art.)
In 2014, an Irish resident earned $32,728.52 in employment income from working for a few weeks in Fort McMurray, and also received $23,002.37 from the Irish government, mostly as means-tested assistance. C Miller J found that these assistance payments qualified under s. 56(1)(u) as “social assistance payment[s] made on the basis of … means,” notwithstanding that they were not income for Irish purposes and were foreign rather than domestic assistance. Accordingly, the taxpayer could not claim full Canadian credits of $28,717, as he did not satisfy the condition in s. 118.94 that “substantially all” of his income for the year was included in computing his taxable income earned in Canada for the year.
In this regard, C Miller J stated:
… [C]ases have relied on percentages as low as 76% to be considered substantially all. In Mr. Kenny’s case, I would be stretching “substantially all” beyond any measure of elasticity if I concluded that 60% represented “substantially all”.
In rejecting counsel’s submission that this result violated the prohibition in Art. 24(1) of the Canada-Ireland Treaty against subjecting nationals of Ireland to more burdensome taxation than for nationals of Canada (and vice versa), C Miller J stated:
I read this provision as applying to nationals, not residents, to ensure that a Canadian citizen residing in Ireland and receiving the same payments (employment from Canada and social assistance from Ireland) as Mr. Kenny would not be treated any differently. I do not find subsection 24(1) of the Treaty assists Mr. Kenny in this regard.