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: Will management fees earned from a person's non-resident holding company qualify as earned income under 146(1) of the Act?
Position: Question of fact.
Reasons: Earned income has to meet certain criteria described in the definition in subsection 146(1) of the Act. Without any details, we cannot make such a determination.
XXXXXXXXXX 2000-001953
M. P. Sarazin
June 26, 2000
Dear Sir:
Re: Earned Income for Registered Retirement Savings Plan Purposes
This is in response to your letter dated April 5, 2000, wherein you requested a ruling that the management fees paid to you by your Barbados corporation qualify as "earned income" within the meaning assigned by subsection 146(1) of the Income Tax Act (the "Act").
Confirmation of the tax consequences associated with completed transactions are provided by the relevant tax services office. Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance tax rulings, please refer to Information Circular 70-6R3 dated December 30, 1996, issued by the Canada Customs and Revenue Agency (the "Agency"). Copies of forms, information circulars and interpretation bulletins are available from your local tax services office or on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. However, we can provide you with the following general comments.
The Canada Customs and Revenue Agency's general views regarding contributions to registered retirement savings plans are found in Interpretation Bulletin IT-124R6, Contributions to Registered Retirement Savings Plan . You will note that the expression "earned income" is discussed in the Glossary of IT-124R6. You can use a form T1023, RRSP Deduction Limit - Calculation of Earned Income for 19__" to help you calculate your earned income.
Where an individual is resident in Canada throughout a taxation year, paragraph (a) of the definition of "earned income" in subsection 146(1) of the Act includes income from:
(i) an office or employment [determined without reference to paragraphs 8(1)(c), (m) and (m.2) of the Act which relate to deductions with for clergyman's residence, registered pension plan contributions and retirement compensation arrangement contributions];
(ii) a business carried on by the individual either alone or as a partner actively engaged in the business.
Whether specific management fees would constitute either income from an office or employment or income from a business is a question of fact.
We hope these comments will be of assistance to you.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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