26 February 2003 External T.I. 2003-0184575 - SUPPORT AMOUNTS PAID BY NON-RESIDENT

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Is a resident of Canada subject to tax in respect of spousal support received from a payer that is resident in Hong Kong?

Position: Yes

Reasons: Spousal support is included in income under ITA 56(1)(b) and such inclusion is not dependent on the tax treatment of the spousal support in the hands of the payer under the Hong Kong tax regime.

XXXXXXXXXX 2003-018457
S. Parnanzone
February 26, 2003

Dear XXXXXXXXXX:

Re: Technical Interpretation Request: Spousal Support from a Non-Resident

We are replying to your letter of January 24, 2003 regarding the above-noted subject.

You are requesting our views regarding the taxation of spousal support payments received by a Canadian resident (the "Recipient") from her non-resident former spouse (the "Payer") under a written agreement having a post-April 1997 "commencement day", within the meaning given to this expression by subsection 56.1(4) of the Income Tax Act ("Act"). The Payer is a resident of Hong Kong. He is a non-resident of Canada for Canadian income tax purposes. You state:

Hong Kong does not appear to tax spousal support- (They tax income from salaries, business and property)

You would like to know whether the Recipient has to include the spousal support payments in income even if the Payer is not entitled to claim an income deduction for the amounts paid.

Our Comments

The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. However, we are prepared to offer the following general comments, which may be of assistance.

Under paragraph 56(1)(b) of the Act, the general rule is that a taxpayer must include any support amount received in a taxation year in computing his or her income for that taxation year, other than certain child support amounts. The expressions "support amount" and "child support amount" are defined in subsection 56.1(4) of the Act and are discussed in Interpretation Bulletin IT-530, Support Payments.

The income inclusion pursuant to paragraph 56(1)(b) is not dependent on the payer of support receiving a tax deduction in Canada or in the payer's country of residence, although there is generally symmetry when both the payer and recipient are residents of Canada. Consequently, any amount received by the Recipient that qualifies as "support amount" but not as "child support amount" referred to in the description of parameter B in paragraph 56(1)(b), must be included in computing the Recipient's income, pursuant to paragraph 56(1)(b) of the Act, regardless of the tax treatment accorded to its payment in the hands of the Payer by Hong Kong.

As a Canadian resident, the Recipient's income is the amount referred to in common parlance as the "worldwide income," including incomes from sources both inside and outside Canada. The Recipient's worldwide income would encompass support amounts that are required to be included in income by virtue of paragraph 56(1)(b) of the Act. Based on the facts, relief under a tax treaty is not available to the Recipient in respect of the inclusion in income of the spousal support amounts because Canada does not have a tax treaty covering Hong Kong.

We trust that the foregoing comments are of assistance.

Yours truly,

Milled Azzi, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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