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: What are the information reporting requirements for payments of commisssions to an independently contracted mutual fund salesperson or to the salesperson's corporation?
Position: T4A Supplementary and Summary Form
Reasons: Where an independently contracted mutual fund salesperson is legally precluded from assigning his/her commissions to a corporation then the commission income must be reported by the individual. Where there is no legal restriction on the transfer of commissions to a corporation and the corporation is actively carrying on the business, the income must be reported by the corporation.
XXXXXXXXXX 2004-008290
Luisa A. Majerus, C.A.
Attention: XXXXXXXXXX
August 16, 2004
Dear Sirs:
Re: Independent Agent Commissions
This is in reply to your letter of June 18, 2004, requesting an interpretation on behalf of XXXXXXXXXX with respect to its information reporting requirements for commissions paid to an independently contracted mutual fund salesperson or his/her corporation.
You indicated that commissions generally are paid directly by XXXXXXXXXX to the salesperson because the Securities Act of British Columbia ("the Securities Act") only permits an individual to be registered as a "dealer" for the purpose of selling mutual funds in the province. It is your understanding that a recent order under the Securities Act exempts a corporation from the registration requirements. As a result of the order, you indicated that commissions may now be assigned to a salesperson's corporation, provided the corporation and the salesperson have a written contract under which the salesperson is liable for the acts and omissions of the corporation related to the securities business. You have requested our views on the proper information reporting where a salesperson, who is registered under the Securities Act, has requested that commissions be assigned to his/her corporation.
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.
It is the CRA's general position that if an insurance agent, realtor, mutual fund salesperson, or other professional is legally, whether contractually or by statute, precluded from assigning his/her commissions to a corporation, then the commission income must be reported by the individual, and cannot be reported through a corporation. Where there is no such legal restriction on the transfer of commissions to a corporation and the corporation is actively carrying on the business, the income must be reported by the corporation. You should consult with the provincial governing bodies to which the salesperson is a member, to determine whether the corporation is legally permitted to carry on the business.
The information reporting requirements for a person paying commissions to an individual that is an independent contractor or to a corporation are determined in accordance with section 200 of the Income Tax Regulations (the "Regulations"). Pursuant to subsection 200(1) of the Regulations, every person who makes a payment described in subsection 153(1) of the Act shall make an information return in prescribed form in respect of the payment (paragraph 153(1)(g) of the Act includes the payment of fees, commissions or other amounts for services). The prescribed information return for such payments is the T4A Supplementary and Summary Form. Accordingly, any person who pays commissions to a salesperson who is an independent contractor or to his/her corporation is required to file this information return (for further information on the payer's responsibilities with respect to issuing information returns, refer to RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary Form).
We hope our comments are helpful.
Yours truly,
Randy Hewlett, B. Comm.
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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