16 October 2012 Ministerial Correspondence 2012-0460111M4 - Olympic Performance Awards

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: 1. Are performance awards received by Olympic athletes taxable?

Position: 1. Yes

Reasons: 1. 56(1)(n) applies to prizes for achievement in a field of endeavour. Performance awards do not qualify as prescribed prizes.

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Dear XXXXXXXXXX:

Thank you for your correspondence about the taxation of performance awards received by Canada’s Olympic athletes. I apologize for the delay in replying.

You believe the performance awards received by successful Olympic athletes should be free from tax. I can confirm that such awards must be included in the athletes’ income. The Income Tax Act states that the total of all amounts a taxpayer receives in a tax year as, or on account of, a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer, other than a prescribed prize, must be included in the taxpayer’s income for that tax year.

The Income Tax Regulations defines a prescribed prize as “any prize that is recognized by the general public and that is awarded for meritorious achievement in the arts, the sciences, or service to the public, but does not include any amount that can reasonably be regarded as having been received as compensation for services rendered or to be rendered.”

While Canadians are proud of the Canadian Olympic athletes’ accomplishments, the performance awards the athletes receive from programs such as the Athlete Excellence Fund are not awarded in recognition of service to the public and do not qualify as a prescribed prize.

The Government of Canada recognizes that sport is a defining part of Canada’s identity and is committed to supporting Canada’s amateur athletes through tax measures and through its partnerships with the Canadian Olympic Committee and Own the Podium. In addition to program funding through Sport Canada, the Government of Canada amended the Income Tax Act for the 2008 and the following tax years to make sure a broader category of amateur athletes could take advantage of tax deferral arrangements provided by creating amateur athletic trusts.

The rules for amateur athletic trusts generally apply to an amateur athlete who is, in a tax year, a member of a registered Canadian amateur athletic association and eligible to compete in international sporting events. The amateur athletes can place in a qualifying account their income for a year gained from endorsements, prizes, and other remuneration related to their athletic endeavours. Income earned in a qualifying account will be tax-deferred in the same way as the income the athlete contributes to the qualifying account. Such income will be taxed generally only when it is distributed to the athlete or eight years after the last year in which the athlete was eligible to compete as a Canadian national team member, whichever is earlier.

The Canada Revenue Agency administers and enforces the Act as passed by Parliament. Tax policy and amendments to the Act are the responsibility of the Department of Finance Canada. If you want to continue to discuss this issue, you can write to the Tax Policy Branch of Finance Canada, 17th Floor, East Tower, L’Esplanade Laurier, 140 O’Connor Street, Ottawa ON K1A 0G5.

I trust that the information I have provided is helpful.

Yours sincerely,

Gail Shea, P.C., M.P.
Minister of National Revenue

Robert Dubis
(905) 721-5191
2012-046011