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: When computing the total amount incurred by the corporation for the services of employees and other individuals for the purposes of clause 206(1.1)(d)(iii)(C) of the Act, can the employer include the employer CPP contributions and EI premiums paid in respect of the employee services?
Position: Yes.
Reasons: Employer costs incurred for its employees would include the payroll related expenses like CPP and EI.
XXXXXXXXXX 2000-001705
M. P. Sarazin
Attention: XXXXXXXXXX
June 1, 2000
Dear Sirs:
Re: Substantial Canadian Presence
This is in response to your facsimiles of March 22 and 28, 2000, requesting our comments concerning the application of clause 206(1.1)(d)(iii)(C) of the Income Tax Act (the "Act").
Clause 206(1.1)(d)(iii)(C) of the Act contemplates that if a corporation incurs over $250,000 for services of employees or other individuals rendered in Canada (other than services relating to an investment activity of the corporation or another corporation which does not deal at arm's length with the corporation and fulfills other conditions, the shares or debt issued by the corporation will be exempt from being "foreign property" as defined in subsection 206(1) of the Act. You are of the view that the CPP contribution and EI premium costs incurred by the corporation in respect of the actual salaries and wages paid to its employees would be included in the calculation of the amount paid by the corporation for services of its employees.
We agree that CPP contribution and EI premium costs incurred by a corporation in respect of the actual salaries and wages paid to its employees would be included in the calculation of the amount paid by the corporation for services of its employees. However, the determination of whether the specific wages (to which any CPP contributions or EI premiums apply) relate to services that were rendered in Canada and whether a corporation would qualify for the exception due to substantial Canadian presence is a question of fact.
We trust the above comments will be helpful.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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