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.
Principal Issues: Is the amount paid by an employer to its employee a commission or a bonus?
Position: General comments provided. Question of Fact.
Reasons: No definition of commission or bonus in the Act.
XXXXXXXXXX 2004-007630
Luisa A. Majerus
(613) 946-3558
July 6, 2004
Dear XXXXXXXXXX:
Re: Commission or Bonus
We are writing in response to your email of May 13, 2004, wherein you requested our opinion on whether an amount paid by your company to one of its employees is considered a commission or a bonus.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
The terms "commission" and "bonus" are not defined in the Income Tax Act or the Income Tax Regulations. Whether an employee is paid a commission or a bonus will likely depend on the terms of the employment contract. In our view, an amount paid to an employee will generally be considered a commission if it is computed with reference to the volume or dollar amount of sales the employee makes on behalf of the employer. An amount paid to an employee will be considered a bonus if it is an additional payment to that which would normally be received by the employee.
We trust our comments are of assistance.
Yours truly,
Randy Hewlett, B.Comm.
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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