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 a payment received by a Canadian resident from the Macau Wealth Sharing Scheme should be included in the taxpayer's calculation of taxable income?
Position: No.
Reasons: The Macau Wealth Sharing Scheme payments from the Macau Special Administrative Region are not income from a source, nor are they taxable under a specific provision of the Act. Such payments appear to be a windfall in accordance with the factors listed in IT334R2.
XXXXXXXXXX
2014-052776
Andrew Deak
(613) 957-2130
July 15, 2014
Dear XXXXXXXXXX:
Re: Macau Wealth Sharing Scheme
We are writing in reply to your letter of April 11, 2014, concerning whether payments made from Hong Kong's "Scheme $6,000" and Macau's "Wealth Partaking Scheme" are taxable under the Income Tax Act (the "Act").
In your inquiry you stated that benefits under the Old Age Security ("OAS") program include the Guaranteed Income Supplement ("GIS"), which is income tested. To calculate GIS entitlements, the OAS program relies on net income computed in accordance with the Act.
It is our understanding that under Hong Kong's "Scheme $6,000", the Hong Kong Government provided a one-time payment of HK$6,000 to each Hong Kong Permanent Identity Cardholder who had attained the age of 18 or above. According to the Government of Hong Kong, the purpose of "Scheme $6,000" was to "leave the wealth with the people" following a surplus of government funds. We have already addressed this question with respect to "Scheme $6,000" in our technical interpretation letter, 2012-0433161E5. In that letter we concluded that payments from "Scheme $6,000" are not income from a source, nor are they taxable under a specific provision of the Act. Therefore, the payments would be considered a non-taxable windfall.
With respect to Macau's "Wealth Partaking Scheme", it is our understanding that the Macau Special Administrative Region ("MSAR") has initiated several "Wealth Partaking Schemes". Under each annual scheme, holders of a valid or renewable MSAR Resident Identity Card, either permanent or temporary, are entitled to a cash premium. The amounts have varied from year to year. In 2013, MOP$ 8,000 was available for permanent residency cardholders and MOP$ 4,800 was available for temporary residency cardholders. The enacting legislation for the scheme states that the payments are not "income" for the purposes of any other MSAR laws.
Residents of Canada are taxed on their worldwide income. In general, the Act provides that a taxpayer include income from all sources (e.g., business, property and employment) in the calculation of taxable income. There are also a number of provisions in the Act that include in taxable income certain amounts that are not income from a source (e.g., Canada Pension Plan benefits and payments under certain government programs).
On the other hand, an amount may constitute a non-taxable windfall for the person receiving it. The factors that are generally considered in the determination that a particular receipt is a windfall include the following:
(a) the taxpayer had not enforceable claim to the payment,
(b) the taxpayer made no organized effort to receive the payment,
(c) the taxpayer neither sought after nor solicited the payment,
(d) the taxpayer had no customary or specific expectation to receive the payment,
(e) the taxpayer had no reason to expect the payment would recur,
(f) the payment was from a source that is not a customary source of income for the taxpayer
(g) the payment was not in consideration for or in recognition of property, services or anything else provided or to be provided by the taxpayer, and
(h) the payment was not earned by the taxpayer as a result of activity or pursuit of gain carried on by the taxpayer and was not earned in any other manner.
Based on the information provided, we are of the view that the payments from the Macau Wealth Sharing Scheme described above are not income from a source, nor are they taxable under a specific provision of the Act. In that regard, it is our view that the payments would be considered a windfall. As such, the payments not required to be reported in the calculation of income for Canadian tax purposes.
We trust that these comments will be of assistance.
Yours truly,
Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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