Principal Issues: 1. Is compensation received from an employer pursuant to an agreement made under section 63 of the Workplace Safety and Insurance Act taxable under the provisions of the Income Tax Act? 2. Does the employer withhold tax on such payments?
Position: 1. No. A payment or payments received "under an employees' or workers' compensation law of Canada or a province in respect of an injury, a disability or death" is included in a taxpayer's income pursuant to paragraph 56(1)(v) of the Act. The taxpayer is entitled to a deduction from income for the amount so included pursuant to subparagraph 110(1)(f)(ii) of the Act. The compensation payment or payments may be received either from a compensation board or from the employer or former employer of the person, as the case may be. 2. No, such compensation is not considered salary, wages or other remuneration and subsection 153(1) of the Act does not require any withholding from compensation paid pursuant to a workers' compensation law. The employer must issue a T5007 information slip to the recipient pursuant to subsection 232(1) of the Regulations.
Reasons: IT-202R2 and the applicable legislation.