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: General comments provided. Question of Fact.
XXXXXXXXXX Denise Dalphy, LL.B
2005-015282
February 13, 2006
Dear XXXXXXXXXX,
Re: Meaning of "Commissions" and "Bonuses"
We are writing in response to your letter of August 25, 2005 to the Trust Unit in the Saint John Tax Services Office ("TSO") wherein you requested our opinion on whether amounts paid by your company to its employees are considered commissions or bonuses. The TSO has requested that we provide you with a response.
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 will be of assistance to you.
Yours truly,
Randy Hewlett,
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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