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:
Is an additional payment, a so called "gross-up" payment, made by the employer to the employee to compensate the employee for the additional Canadian tax payable on a tax equalization payment income from employment which is wholly attributable to the employee's duties performed in Canada?
Position: yes
Reasons:
Same tax treatment as the tax equalization payment described in our letter of Feb. 5, 1999, file #981979.
XXXXXXXXXX 1999-000944
G. Middleton
Attention: XXXXXXXXXX (613) 957-2122
July 31, 2000
Dear Sirs:
Re: Tax Equalization Payments
This is in reply to your letter of February 15, 1999, our previous reply letter of February 5, 1999 and further to our telephoned conversation (Middleton/XXXXXXXXXX) of February 15, 2000 regarding tax equalization payments.
The hypothetical situation is the same as set out in our letter of February 5, 1999. In that letter, we stated that the tax equalization payment described therein is income from employment which is wholly attributable to the employee's duties performed in Canada and it is required to be included in the non-resident person's taxable income earned in Canada pursuant to subparagraph 115(1)(a)(i) of the Income Tax Act (the "Act").
In your second letter, you asked us a further question concerning an additional payment, a so called "gross-up" payment, made by the employer to the employee to compensate the employee for the additional Canadian tax payable on the above mentioned tax equalization payment. In our view, the tax treatment of the "gross-up" payment is the same as the tax treatment described above for the tax equalization payment. That is, the "gross-up" payment is income from employment which is wholly attributable to the employee's duties performed in Canada and it is also required to be included in the non-resident person's taxable income earned in Canada pursuant to subparagraph 115(1)(a)(i) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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