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 a refund under the IFA of BC provincial income tax to an individual taxable?
Position: No.
Reasons: The refund is not a benefit of employment.
XXXXXXXXXX T. Young, CA
2004-008658
September 21, 2004
Dear XXXXXXXXXX:
Re: British Columbia International Financial Activity Act (the "IFA Act")
We are writing in reply to your letter dated July 15, 2004, concerning amounts paid to individuals under the IFA Act. Under the IFA Act, a qualifying employee (the "Employee") of an eligible corporation may receive a refund of up to 75% of his or her tax payable under the British Columbia Income Tax Act. You asked us whether this refund would be taxable to the Employee.
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, which may be found on our web site at www.cra.gc.ca. However, we are prepared to provide the following comments, which may be of assistance to you.
Although the employer must apply to register the Employee as an "IFA specialist", as defined in subsection 2 of the IFA Act, it is the IFA Act itself that entitles the Employee to a refund of British Columbia income tax. Therefore, we are of the view that the refund of tax under the IFA is not received "in respect of, in the course of, or by virtue of" the Employee's employment. Accordingly, the amount does not have to be included in the Employee's income under the federal Income Tax Act.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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