Principal Issues: Where an amount of an indirect benefit would be included in computing a non-resident taxpayer’s income under subsection 15(1) of the Act, if the amount of the benefit were a payment made directly to the non-resident taxpayer and if the non-resident taxpayer were resident in Canada, would the CRA interpret paragraph 246(1)(a) of the Act as including such a shareholder’s benefit in that non-resident taxpayer’s taxable income earned in Canada even though the benefit is akin to income from property rather than any of the Canadian income sources described in subsection 2(3) of the Act?
Position: To the extent that only subsection 15(1) of the Act is relevant in the analysis as to whether a benefit is being conferred under paragraph 246(1)(a), such a benefit would generally not be considered to be taxable income earned in Canada, as it would not be included under subsection 2(3) and Division D of Part I of the Act.
Reasons: A non-resident’s tax liability under Part I of the Act, including any liability that may result from the inclusion of a benefit under paragraph 246(1)(a) of the Act, is generally determined by the non-resident taxpayer’s taxable income earned in Canada under subsection 2(3) and Division D of Part I of the Act. Whether the amount of the benefit can be considered to be taxable income earned in Canada will depend, among other things, on the nature of the benefit being conferred.