6 June 2000 External T.I. 1999-0009815 - Accrued interest on Immigration on CSB

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:

Whether interest received, or accrued interest receivable, on Canada Savings Bonds is fully taxable to a Canadian resident under paragraph 12(1)(c) of the Act in spite of the fact that the accrued interest relates to years throughout which the person is a non-resident person.

Position: yes

Reasons: Interest received or receivable by a Canadian resident is required to be included in income and is subject to Part I tax to the extent it has not been included in income in a prior year by virtue of paragraph 12(1)(c) of the Act.

XXXXXXXXXX 								1999-001058
G. Middleton
(613)  957-2122
June 6, 2000

Dear Sir/Madam:

We are writing in response to your letters of May 14, 2000 and September 22, 1999, and further to the recent telephone conversation of May 24th between Mr. Major and XXXXXXXXXX, concerning the tax treatment of Canada Savings Bonds (CSBs) interest which is received or receivable by residents of Canada.

By virtue of paragraph 12(1)(c) of the Income Tax Act (the "Act"), any amount of interest received or receivable by an individual in a year is required to be included in the individual's income to the extent that the interest was not included in computing the individual's income for a preceding year and such interest income is subject to tax under Part I of the Act. As a result of this provision, every Canadian resident is required to include in income for a particular year the amount of CSB interest that is received or receivable (including accrued interest receivable) by the person in the particular year to the extent that such CSB interest was not included in computing the person's income in a preceding year. This would include any amount of CSB interest that accrued in a preceding year(s) throughout which the person was a non-resident person.

This income tax treatment is similar to the tax treatment for wages, pensions, etc. which are subject to tax on a received basis. Such amounts received by a Canadian resident person are required to be included in income in the year in which the amounts are received in spite of the fact that these amounts may be wholly attributable to employment duties performed by the person outside Canada for a non-resident employer for years throughout which the person was a non-resident person.

The comments in Interpretation Bulletin IT-155R3, entitled "Exemption from Non-Resident Tax on Interest Payable on Certain Bonds, Debentures, Notes, Hypothecs or Similar Obligations", deals with interest paid or credited by Canadian residents to non-resident persons. As indicated therein, payments made by the Government of Canada to non-resident persons in respect of interest on CSBs would not be subject to tax (referred to as "non-resident tax") under Part XIII of the Act by virtue of the exemption contained in paragraph 212(1)(b) of the Act.

However, the comments in IT-155R3 do not apply to the amounts received or receivable by Canadian residents in respect of interest on CSBs; such interest amounts are required to be included in a Canadian resident person's income and are subject to tax under Part I of the Act as described above.

We trust our comments will be of some assistance to you.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch