Income Tax Severed Letters - 2005-08-05

Principal Issues: Why an employee of a brokerage firm, who earns commissions, would be denied the GST/HST employee rebate on employment expenses

Position: Employees of listed financial institutions, such as brokerage firms, cannot claim the GST/HST employee rebate

Reasons: Section 253 of the Excise Tax Act (the ETA) provides that one of the conditions for an individual to claim the employee GST/HST rebate on employment expenses is that the individual must be an employee of a registrant that is not a listed financial institution. Subsection 123(1) and subparagraph 149(1)(a)(iii) of the ETA define a "listed financial institution" to include a person whose main business activity is as trader or dealer in, or as a broker or salesperson of, financial instruments or money. A brokerage firm would generally fit that definition.

Principal Issues: Can the estate of a deceased holder of a stock option make a designation under section 7(1.31) of the Act if it receives and exercises the option?

Position: Yes

Reasons: The result is comparable to the intended result if the employee had been able to exercise the option and dispose of the shares at the time of death.

Principal Issues: Whether withholding tax and information returns are required in respect of employment, scholarships, bursaries, fellowships and research grants paid to residents and non-residents students of Canada.

Position: Withholding tax and T4 information returns are required for payments in respect of salaries and wages paid to residents and non-residents of Canada.
Withholding tax is not required in respect of scholarships, bursaries, fellowships or research grants. A T4A information return is required to be filed by the payer in respect of such payments to residents and non-residents of Canada

Reasons: The withholding tax requirements under subsection 105(1) of the Regulations for payments made to non-residents does not apply to remuneration paid in respect of salary or wages. Withholding tax is required in respect of salaries or wages pursuant to the rules outlined in subsection 153(1) of the Act for both residents and non-residents of Canada and T4 information returns are required to be filed pursuant to Regulation 200(1).
Withholding tax is not required for amounts that are included in calculating a resident's income under either of paragraphs 56(1)(n) or (o), or, would have been required by paragraph 56(1)(n) or (o) to be included in computing the non-resident person's income for the year if the non-resident person were resident in Canada throughout the year.

Principal Issues: Whether Mr. X, the beneficial but not legal owner, may claim CCA on a vehicle.

Position: Question of fact, but likely yes.

Reasons: If Mr. X has full possession and unrestricted use of the vehicle and pays all of the relevant expenses, he would be entitled to claim CCA for the business use of the vehicle.