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: whether spousal support, child support, and house loan payments, paid to non-resident, is deductible
Position: question of fact
XXXXXXXXXX Gwen Mah
Re: Deductibility of Support Payments
Your e-mail dated April 11th, 2007
We are writing in response to your e-mail of April 11, 2007 requesting our views regarding the deductibility of 3 types of payments for Canadian income tax purposes: spousal support, child support, and house loan payments.
The facts provided in your e-mail are:
- You have retained your XXXXXXXXXX Nationality while residing in Canada since XXXXXXXXXX;
- You have been working in XXXXXXXXXX under a "work permit", which covers the period from XXXXXXXXXX to XXXXXXXXXX;
- In XXXXXXXXXX, you applied for permanent residence in Canada and you are waiting for the application to move through the process;
- You are covered by the provincial health care plan in XXXXXXXXXX;
- You were legally separated in XXXXXXXXXX and divorced on XXXXXXXXXX;
- You have XXXXXXXXXX children who reside with their mother, your former spouse, in XXXXXXXXXX;
- You have been paying support for the XXXXXXXXXX children since XXXXXXXXXX;
- You have been paying one-half of the loan payments on the house in XXXXXXXXXX; and
- You will be paying support to your former spouse, commencing XXXXXXXXXX.
The particular circumstances in your e-mail on which you have asked for our views is a factual situation. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on transactions involving specific taxpayers other than in the form of an advance income tax ruling. Since your situation involves a completed transaction, you should submit all relevant facts and documentation to the appropriate taxation services office for their views. However, we are prepared to offer the following general comments, which may be of assistance. As discussed by telephone on April 19, 2007, please consult with Interpretation Bulletin 530R "Support Payments" ("IT 530R") and the Guide "Support Payments" (form P102) for more information regarding the deductibility of these three types of payments. It is a question of fact whether you are a resident of Canada in any particular year. For a determination of residence status, please refer to Interpretation Bulletin 221R3 "Determination of an Individual's Residence Status" ("IT 221R3"). These documents are available under forms and publications at www.cra-arc.gc.ca. The following comments are made on the assumption that you are a resident of Canada.
It is a question of fact whether any of the payments are deductible for Canadian tax purposes. For spousal support payments to be deductible for Canadian tax purposes the criteria listed in subsection 56.1(4) and paragraph 60(b) of the Canadian Income Tax Act (the "Act") must be satisfied. The criteria require, amongst other things, that the payments meet the definition of "support amount", which are amounts paid: to your former spouse; as an allowance for the maintenance of your former spouse; on a periodic basis pursuant to an order of a competent tribunal or under a written agreement; and, over which your former spouse has discretion with regard to use.
Where an order or agreement provides for both the support of children and your former spouse, that order or agreement must clearly specify an amount that is solely for the support of your former spouse. Otherwise, amounts in an order or agreement are considered to be support for your children. For more details, please refer to Chart 2 in form P102 and paragraph 6 in IT 530R.
The child support payments, in your case, are not deductible as these payments are made pursuant to an order of a competent tribunal that is dated after April 1997, the effective date of a number of legislative changes concerning support payments. Also, house loan payments are not deductible unless they meet certain conditions. For details, please refer to page 11 of form P102 and paragraph 27 of IT 530R.
We trust the above is helpful. Please contact us if you have any questions or comments.
Olli Laurikainen, CA
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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