7 October 2020 APFF Roundtable Q. 18, 2020-0862931C6 F - 12(1)(x) and CEBA

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12(1)(x), 12(2.2), 20(1)(hh)

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This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.

CRA Response to Questions 18(a) and 18(d)

CRA Response to Question 18(b)

CRA Response to Question 18(c)

CRA Response to Question 18(e)

Principal Issues: Under the Canada Emergency Business Account program (“CEBA”), loans (up to a maximum of $40,000) can be provided by financial institutions to help businesses pay for non-deferrable operation expenses. Under the CEBA, 25% of the loan (up to a maximum of $10,000) can be forgiven if at least 75% of the borrowed funds are reimbursed on or before December 31, 2022. a) Whether, for the purposes of paragraph 12(1)(x), the forgivable portion of the loan could be viewed as being received at the time the borrowed funds are received by the debtor; b) Whether the forgivable portion of the loan is paid by a government, municipality or other public authority pursuant to subparagraph 12(1)(x)(ii); c) Whether subparagraph 12(1)(x)(iii) or subparagraph 12(1)(x)(iv) applies to the forgivable portion of the loan; d) At what time the forgivable portion of the loan would be included in computing the income of the debtor; e) Where a corporation with a December 31 year-end has borrowed $40,000 under the CEBA to pay for allowable non-deferrable operation expenses incurred in its 2020 taxation year: (i) At what time the corporation would include the forgivable portion of the loan; (ii) When should the election under paragraph 12(2.2) be filed; (iii) Where the borrowed money is used to pay for allowable non-deferrable operation expenses incurred in the corporation’s 2021 taxation year-end, when should the election under paragraph 12(2.2) be filed; (iv) Where the corporation has not reimbursed at least 75% of the loan on or before December 31, 2022, when would the corporation be allowed to claim the deduction under paragraph 20(1)(hh)?

Position: a) and d) Under paragraph 12(1)(x), the forgivable portion of the loan is included in the income of the debtor in the taxation year in which the loan is received; b) The forgivable portion of the loan would be received from a person described in subparagraph 12(1)(x)(i), assuming the requirements of clause 12(1)(x)(i)(A), (B) or (C) are met; c) It could reasonably be considered that the forgivable portion of the loan has been received as assistance as a forgivable loan in respect of an outlay or expense pursuant to subparagraph 12(1)(x)(iv); e)(i) The forgivable portion of the loan would be included in the income of the corporation in its taxation year ended December 31, 2020; e)(ii) The corporation could avoid the income inclusion under paragraph 12(1)(x) by filing the election under subsection 12(2.2) with its income tax return for its 2020 taxation year to reduce the amount of allowable non-deferrable operation expenses incurred in that year; e)(iii) The corporation could avoid the income inclusion under paragraph 12(1)(x) in its 2020 taxation year by filing the election under subsection 12(2.2) with its income tax return for its 2021 taxation year to reduce the amount of allowable non-deferrable operation expenses incurred in that year; e)(iv) Where the intent of the parties is that any amount reimbursed by the corporation will be applied first in repayment of the portion of the loan that was initially forgivable, the corporation could claim a deduction under paragraph 20(1)(hh) with respect to the amount reimbursed in the taxation year in which the reimbursement is made, up to the amount included in its income pursuant to paragraph 12(1)(x). If the intent of the parties is unclear in that regard, the deduction under paragraph 20(1)(hh) would be equal to that proportion of the amount reimbursed in the taxation year that the portion of the loan that was initially forgivable is of the outstanding balance of the loan as at January 1st, 2023, due to the fungible character of the borrowed money. Under this approach, the total amount of the deduction under paragraph 20(1)(hh) will be equal to the amount of the income included under paragraph 12(1)(x) when the borrowing of $40,000 is fully reimbursed.

Reasons: According to the law.

ROUNDTABLE WITH THE CANADA REVENUE AGENCY ("ARC") FOCUSING ON THE CANADA EMERGENCY WAGE SUBSIDY PROGRAM ("CEWS")

APFF - CONGRESS 2020

FEDERAL TAX ROUNDTABLE OCTOBER 7, 2019
2019 APFF CONFERENCE

18. Canada Emergency Business Account program (“CEBA”)

In certain circumstances, $10,000 portion of the total of $40,000 received under the CEBA program may be considered as a grant. We wish to know when the recipient of that $10,000 grant will be required to include that amount in computing its income for taxation purposes. Paragraph 12(1)(x) states:

"Income inclusions

12 (1) There shall be included in computing the income of a taxpayer for a taxation year as income from a business or property such of the following amounts as are applicable

(…)

(x) any particular amount (other than a prescribed amount) received by the taxpayer in the year, in the course of earning income from a business or property…”

Questions to the CRA

(a) Should the $10,000 amount be considered to have been received at the time the $40,000 loan was advanced to the corporation (the "Corporation")?

(b) Assuming that subparagraph 12(1)(x)(i) is satisfied, should it be concluded that the $10,000 amount is paid by a government, municipality or other public authority (e.g. the creditor), for the purposes of subparagraph 12(1)(x)(ii)?

(c) Assuming that subparagraphs 12(1)(x)(i) and 12(1)(x)(ii) are satisfied, should it be concluded that the $10,000 amount is:

(i) an amount that is to considered under subparagraph 12(1)(x)(iii) as a grant or forgivable loan?

(ii) an amount to considered under subparagraph 12(1)(x)(iv) as assistance in the form of a grant or loan, whether repayable conditionally or in any other form, in respect of an outlay or expense?

(d) When should the $10,000 amount be added in computing income?

(e) In the following example, the Corporation has a year end of December 31, 2020. It received a $40,000 loan under the CEBA program. The Corporation incurred salary expenses that were paid with the $40,000 loan in its 2020 year, but a guarantor paid the creditor $10,000 on January 1, 2023.

(i) In this example, when will the Corporation be required to add the $10,000 to its income - at the time the loan is made or at the time the guarantor makes a payment to the creditor, i.e. January 1, 2023 (the day after December 31, 2022, the deadline for repayment of the $30,000 loan)?

(ii) If it is the earlier of these times, the Corporation would not be required to make the election provided for in subsection 12(2.2). On the other hand, if it is the later of the two times, and this is January 1, 2023, would the Corporation be required to make the election under subsection 12(2.2) in its taxation year ending on December 31, 2020, 2022 or 2023?

(iii) In the event that the $40,000 loan is used to pay salaries in the 202 year, would the election under subsection 12(2.2) have to be made on December 31, 2020 or 2021?

(iv) In the event that the Corporation is taxable under paragraph 12(1)(x) for its December 31, 2020 year and does not repay the loan by December 31, 2022, when will it be able to take the deduction provided for in paragraph 20(1)(hh)? Is this on January 1, 2023 for its entirety, or must it prorate the loan repayment amount over 5 years? (i.e. ¼ ($10,000 / $40,000) of the capital repayment).

CRA Response

General Comments

The CEBA is a program (the "Program") launched by the Government of Canada to provide financial assistance to eligible businesses and non-profit organizations where their revenues have been temporarily reduced as a result of the COVID-19 pandemic. The Program was implemented by eligible Canadian financial institutions in collaboration with Export Development Canada.

The Program provides loans of up to $40,000 to eligible small businesses and non-profit organizations to help them pay for eligible expenses that cannot be deferred. Generally, the lender is the borrower's financial institution with which the borrower has an active business chequing account or an active business operating account.

In summary, such a loan does not bear interest and the principal does not have to be repaid in whole or in part during the period from the time the loan is made until December 31, 2022. In addition, the loan is eligible for being forgiven in an amount up to $10,000 provided that an amount of $30,000 has been repaid before December 31, 2022. Where the repaid amount of the loan is less than $30,000 on December 31, 2022, the outstanding balance of the loan is converted into a three-year term loan at an annual interest rate of 5%. Only interest is payable monthly starting January 1, 2023. The principal of the loan can be repaid in whole or in part without penalty. The outstanding balance of the loan must be repaid in full by December 31, 2025.

The Income Tax Act provides that certain incentive payments, refunds, contributions, allowances and amounts of assistance received by a taxpayer while earning income from a business or property are to be included in income to the extent that they have not otherwise been applied to reduce the cost of property or the amount of an outlay or expense made or incurred.

More specifically, paragraph 12(1)(x) provides that an amount - other than a prescribed amount - received by the taxpayer in in the taxation year, in the course of earning income from a business or property, is to be included in computing the taxpayer's income to the extent that the amount is not described in subparagraphs 12(1)(x)(v) to 12(1)(x)(viii) and the amount satisfies the conditions relating to the category of payer and the purpose for which the payment is made.

Categories of payers

For paragraph 12(1)(x) to apply, the amount received by the taxpayer must have been paid by a payer who qualifies under either of the two categories described in subparagraphs 12(1)(x)(i) or 12(1)(x)(ii).

One of the payers referred to in subparagraph 12(1)(x)(i) is a person or partnership who pays the amount and satisfies one of the conditions set out in clauses (A), (B) and (C) of that subparagraph.

Under subparagraph 12(1)(x)(ii), the payer is a government, municipality or other public authority.

Purposes

Finally, it must be reasonable to consider that the amount was received for one of the purposes referred to in subparagraph 12(1)(x)(iii) or subparagraph 12(1)(x)(iv).

Subparagraph 12(1)(x)(iii) refers to a payment received as an inducement in various forms. Subparagraph 12(1)(x)(iv) refers to a payment received as a refund, reimbursement, contribution or allowance or as assistance, in various forms, notably in the form of a forgivable loan in respect of, inter alia, an outlay or expense.

CRA Response to Questions 18(a) and 18(d)

First of all, the question of whether paragraph 12(1)(x) is applicable to a particular taxpayer, more particularly in the context of the Program, is a question of fact and law that can only be resolved after a complete review of all the relevant facts, actions, circumstances and documents surrounding the taxpayer and, more particularly, the loan agreement between the taxpayer and its financial institution. Since the statement relating to this issue contains very little information, we will limit ourselves to making the following general comments with respect to the application of paragraph 12(1)(x) in the context of the Program.

The portion of the loan, up to $10,000, that may be written off, must be included under paragraph 12(1)(x) in computing the Partnership's income from a business or property in the taxation year in which the amount borrowed under the loan was received by the Partnership.

CRA Response to Question 18(b)

Considering that by virtue of the Program, the repayable portion of the loan will be received from the Corporation's financial institution under a loan agreement, the financial institution will be a payer referred to in subparagraph 12(1)(x)(i) on the assumption that one of clauses 12(1)(x)(i)(A), (B) or (C) applies in this case. In those circumstances, subparagraph 12(1)(x)(ii) will be inapplicable.

CRA Response to Question 18(c)

Given the context of the Program, it might be reasonable to consider the portion of the loan that could be written off as being received as assistance in the form of a forgivable loan in respect of an expense incurred or made by the Corporation that is described in subparagraph 12(1)(x)(iv).

CRA Response to Question 18(e)

The portion of the loan that may be written off, namely the amount of $10,000 received by the Corporation, must be included by virtue of paragraph 12(1)(x) in computing its income from a business or property in its taxation year ending December 31, 2020, regardless of whether or not a guarantor has paid an equivalent amount to the lending financial institution.

Subsection 12(2.2) allows a taxpayer who receives in a taxation year an amount that would otherwise be included under paragraph 12(1)(x), to make an election to prevent the application of paragraph 12(1)(x) and to reduce the amount of an outlay or expense made or incurred before the end of the following taxation year - other than an outlay or expense in respect of the cost of property of the taxpayer- by all or part of an amount received. Thus, the election may be made in respect of an outlay or expense - whether deductible or not - incurred in the taxation year, in the following taxation year or in any preceding taxation year of the taxpayer (Footnote 1).

The Corporation could therefore elect to avail itself of the election provided for in subsection 12(2.2) with respect to salary expenditures made during its taxation year ended December 31, 2020. The election must be submitted by the Corporation in a letter attached to its income tax return filed for such year.

The Corporation may also make an election under subsection 12(2.2) with respect to salary expenditures incurred or made during its taxation year ended December 31, 2021. Thus, the amount of $10,000 will not have to be required to be included pursuant to paragraph 12(1)(x) in computing the Corporation's income for its taxation year ending December 31, 2020. The election must be submitted by the Corporation in a letter attached to its income tax return filed for its taxation year ending December 31, 2021.

Paragraph 20(1)(hh) provides, inter alia, that an amount repaid by a taxpayer in a taxation year pursuant to a legal obligation to repay all or part of an amount included by virtue of paragraph 12(1)(x) in computing the taxpayer's income for the year or a preceding taxation year is deductible in computing the taxpayer's income from a business or property for the year.

In the case of a loan granted under the Program, apart from the events of default otherwise provided for in the loan agreement, the Corporation would generally only have a legal obligation to repay the amount included under paragraph 12(1)(x) on January 1, 2023, i.e. the date on which this amount can no longer be forgiven and must be repaid by December 31, 2025.

In the event that the intention of the Corporation and its financial institution is that, on January 1, 2023, any partial repayment of the loan principal will be applied first to the portion of the loan that initially was eligible for forgiveness, the Corporation may avail itself of the deduction provided for in paragraph 20(1)(hh) in respect of such repayment for its taxation year in which the repayment is made, for the entire amount of the principal repaid, up to the amount otherwise included under paragraph 12(1)(x).

In the event that the intention of the parties is not specified in this regard, the Corporation may claim the deduction provided for in paragraph 20(1)(hh) for its taxation year in which the repayment is made in respect of the portion of the amount repaid during the year that the portion of the loan that was initially forgivable is of the outstanding balance of the loan as at January 1st, 2023, given the fungible nature of the borrowed money. Under this approach, the total amount of the deduction under paragraph 20(1)(hh) will be equal to the amount of the inclusion under paragraph 12(1)(x) at the time of the repayment in full of the $40,000 loan.

Sidi Ouattara
(450) 926-7687
October 7, 2020
2020-086293

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 CANADA REVENUE AGENCY, Interpretation Bulletin IT-273R2 (Archived) "Government Assistance - General Considerations", September 13, 2000, paragraph 14.

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Text of Severed Letter

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.

Principales Questions: Under the Canada Emergency Business Account program (“CEBA”), loans (up to a maximum of $40,000) can be provided by financial institutions to help businesses pay for non-deferrable operation expenses. Under the CEBA, 25% of the loan (up to a maximum of $10,000) can be forgiven if at least 75% of the borrowed funds are reimbursed on or before December 31, 2022. a) Whether, for the purposes of paragraph 12(1)(x), the forgivable portion of the loan could be viewed as being received at the time the borrowed funds are received by the debtor; b) Whether the forgivable portion of the loan is paid by a government, municipality or other public authority pursuant to subparagraph 12(1)(x)(ii); c) Whether subparagraph 12(1)(x)(iii) or subparagraph 12(1)(x)(iv) applies to the forgivable portion of the loan; d) At what time the forgivable portion of the loan would be included in computing the income of the debtor; e) Where a corporation with a December 31 year-end has borrowed $40,000 under the CEBA to pay for allowable non-deferrable operation expenses incurred in its 2020 taxation year: (i) At what time the corporation would include the forgivable portion of the loan; (ii) When should the election under paragraph 12(2.2) be filed; (iii) Where the borrowed money is used to pay for allowable non-deferrable operation expenses incurred in the corporation’s 2021 taxation year-end, when should the election under paragraph 12(2.2) be filed; (iv) Where the corporation has not reimbursed at least 75% of the loan on or before December 31, 2022, when would the corporation be allowed to claim the deduction under paragraph 20(1)(hh)?

Position Adoptée: a) and d) Under paragraph 12(1)(x), the forgivable portion of the loan is included in the income of the debtor in the taxation year in which the loan is received; b) The forgivable portion of the loan would be received from a person described in subparagraph 12(1)(x)(i), assuming the requirements of clause 12(1)(x)(i)(A), (B) or (C) are met; c) It could reasonably be considered that the forgivable portion of the loan has been received as assistance as a forgivable loan in respect of an outlay or expense pursuant to subparagraph 12(1)(x)(iv); e)(i) The forgivable portion of the loan would be included in the income of the corporation in its taxation year ended December 31, 2020; e)(ii) The corporation could avoid the income inclusion under paragraph 12(1)(x) by filing the election under subsection 12(2.2) with its income tax return for its 2020 taxation year to reduce the amount of allowable non-deferrable operation expenses incurred in that year; e)(iii) The corporation could avoid the income inclusion under paragraph 12(1)(x) in its 2020 taxation year by filing the election under subsection 12(2.2) with its income tax return for its 2021 taxation year to reduce the amount of allowable non-deferrable operation expenses incurred in that year; e)(iv) Where the intent of the parties is that any amount reimbursed by the corporation will be applied first in repayment of the portion of the loan that was initially forgivable, the corporation could claim a deduction under paragraph 20(1)(hh) with respect to the amount reimbursed in the taxation year in which the reimbursement is made, up to the amount included in its income pursuant to paragraph 12(1)(x). If the intent of the parties is unclear in that regard, the deduction under paragraph 20(1)(hh) would be equal to that proportion of the amount reimbursed in the taxation year that the portion of the loan that was initially forgivable is of the outstanding balance of the loan as at January 1st, 2023, due to the fungible character of the borrowed money. Under this approach, the total amount of the deduction under paragraph 20(1)(hh) will be equal to the amount of the income included under paragraph 12(1)(x) when the borrowing of $40,000 is fully reimbursed.

Raisons: According to the law.

TABLE RONDE AVEC L’AGENCE DU REVENU DU CANADA (« ARC ») PORTANT PRINCIPALEMENT SUR LA SUBVENTION SALARIALE D’URGENCE DU CANADA (« SSUC »)
APFF - CONGRÈS 2020

18. Compte d’urgence pour les entreprises canadiennes (CUEC)

Dans certaines circonstances, une partie de 10 000 $ du montant total de 40 000 $ obtenu par le biais du programme du CUEC pourra être considérée à titre de subvention. Nous désirons savoir à quel moment le bénéficiaire de cette subvention de 10 000 $ devra inclure ce montant dans le calcul de son revenu (imposition). À la lecture de l’alinéa 12(1)x) L.I.R. on y indique que :

« Sommes à inclure dans le revenu - 12 (1) Sont à inclure dans le calcul du revenu tiré par un contribuable d’une entreprise ou d’un bien, au cours d’une année d’imposition, celles des sommes suivantes qui sont applicables :

(…)

x) Paiements incitatifs et autres un montant (à l’exclusion d’un montant prescrit) reçu par le contribuable au cours de l’année pendant qu’il tirait un revenu d’une entreprise ou d’un bien : »

Questions à l’ARC

a) Pouvons-nous conclure que le montant de 10 000 $ a été reçu au moment où le prêt de 40 000 $ a été encaissé par une société (la « Société ») ?

b) En considérant que le sous-alinéa 12(1)x)(i) L.I.R. est respecté, pouvons-nous conclure que le montant du 10 000 $ est un montant provenant, soit d’un gouvernement, d’une municipalité ou d’une autre administration (par exemple le créancier), aux fins du sous-alinéa 12(1)x)(ii) L.I.R. ?

c) En considérant que les sous-alinéas 12(1)x)i) et 12(1)x)ii) L.I.R. sont respectés, pouvons-nous conclure que le montant de 10 000 $ est :

i) un montant qui peut être considéré au sous-alinéa 12(1)x)iii) L.I.R. à titre de subvention ou de prêt à remboursement conditionnel ?

ii) un montant qui peut être considéré au sous-alinéa 12(1)x)iv) L.I.R. à titre d’aide sous forme de subvention ou de prêt à remboursement conditionnel ou sous toute autre forme à l’égard d’une dépense engagée ou effectuée ?

d) Pouvez-vous préciser à quel moment le montant de 10 000 $ devra être ajouté au calcul du revenu ?

e) Dans l’exemple suivant, la Société a une fin d’année au 31 décembre 2020. Elle a reçu le prêt de 40 000 $ du programme du CUEC. La Société a engagé des dépenses de salaires qui ont été payés par ce prêt de 40 000 $ dans son année 2020, mais un garant a versé au créancier le 10 000 $ le 1er janvier 2023.

i) Dans cet exemple, à quel moment la Société devra-t-elle ajouter le montant de 10 000 $ dans son revenu ? Au moment où le prêt est consenti ou au moment où le garant verse un paiement au créancier, soit le 1er janvier 2023 (le lendemain du 31 décembre 2022, soit à la date de limite du remboursement du prêt de 30 000$).

ii) Dans le cas où le moment serait « le plus tôt », la Société n’aurait pas à faire le choix prévu au paragraphe 12(2.2) L.I.R. Par contre, dans le cas où le moment serait « le plus tardif » des deux moments, et que ce serait le 1er janvier 2023, la Société serait-elle tenue de faire le choix prévu au paragraphe 12(2.2) L.I.R. dans son exercice financier terminé le 31 décembre 2020, en 2022 ou en 2023 ?

iii) Advenant que le prêt de 40 000$ serve à payer des salaires dans l’année 2021. Est-ce que le choix prévu au paragraphe 12(2.2) L.I.R. devra être fait au 31 décembre 2020 ou 2021 ?

iv) Dans le cas où la Société s’impose en vertu de l’alinéa 12(1)x) L.I.R. au 31 décembre 2020 et qu’elle ne rembourse pas le prêt au 31 décembre 2022, pouvez-vous nous indiquer à quel moment elle pourra prendre la déduction prévue à l’alinéa 20(1)hh) L.I.R.? Est-ce le 1er janvier 2023 dans sa totalité ou devra-t-elle effectuer un prorata à l’avancement du prêt qu’elle remboursera par exemple sur 5 ans? (soit ¼ (10 000$ / 40 000$) du remboursement de capital).

Réponses de l’ARC

Commentaires généraux

Le CUEC est un programme (« Programme ») lancé par le gouvernement du Canada afin de fournir une aide financière aux entreprises et aux organismes sans but lucratif admissibles lorsque leurs revenus ont été temporairement réduits à cause de la pandémie de la COVID-19. Le Programme été mis en œuvre par les institutions financières canadiennes admissibles en collaboration avec Exportation et développement Canada.

Le Programme offre des prêts pouvant atteindre un montant maximum de 40 000$ aux petites entreprises et aux organismes sans but lucratif admissibles afin de les aider à payer leurs dépenses admissibles ne pouvant être reportées. Généralement, le prêteur est l’institution financière de l’emprunteur auprès de laquelle il possède un compte-chèques d’entreprise actif ou un compte d’exploitation d’entreprise actif.

De façon sommaire, un tel prêt ne porte pas intérêt et le principal n’a pas à être remboursé en totalité ou en partie pendant la période allant du moment où le prêt est accordé jusqu’au 31 décembre 2022. De plus, le prêt est admissible à une radiation pouvant atteindre 10 000 $ pourvu qu’un montant de 30 000 $ ait été remboursé avant le 31 décembre 2022. Lorsque le montant remboursé du prêt est inférieur à 30 000 $ au 31 décembre 2022, le solde non remboursé du prêt est converti en prêt à terme de trois ans au taux d’intérêt annuel de 5%. Seuls les intérêts sont payables mensuellement à compter du 1er janvier 2023. Le principal du prêt peut être remboursé par anticipation en totalité ou en partie sans pénalité. Le solde impayé du prêt doit être remboursé en totalité le 31 décembre 2025.

La Loi de l’impôt sur le revenu prévoit que certains paiements incitatifs, remboursements, contributions, indemnités et montants d’aide qu’un contribuable reçoit pendant qu’il tire un revenu d’une entreprise ou d’un bien sont à inclure dans son revenu dans la mesure où ils n’ont pas par ailleurs été appliqués en réduction du coût d’un bien ou du montant d’une dépense engagée ou effectuée.

De façon plus précise, l’alinéa 12(1)x) L.I.R. édicte que le montant – à l’exception d’un montant prescrit – reçu par un contribuable au cours d’une année d’imposition pendant qu’il tirait un revenu d’entreprise ou de bien est à inclure dans le calcul de son revenu dans la mesure où le montant, d’une part, n’est pas visé par les sous-alinéas 12(1)x)(v) à 12(1)x)(viii) L.I.R. et, d’autre part, respecte les conditions relatives à la catégorie de payeur et à la fin visée par le paiement.

Catégories de payeurs

Pour que l’alinéa 12(1)x) L.I.R. s’applique, le montant reçu par le contribuable doit avoir été payé par un payeur se qualifiant dans l’une ou l’autre des deux catégories décrites aux sous-alinéas 12(1)x)(i) ou 12(1)x)(ii) L.I.R.

Parmi les payeurs mentionnés au sous-alinéa 12(1)x)(i) L.I.R. il y a celui – la personne ou la société de personnes – qui paie un montant et qui rencontre l’une des conditions prévues aux divisions (A), (B) et (C) de ce sous-alinéa.

Quant au sous-alinéa 12(1)x)(ii) L.I.R., le payeur est un gouvernement, une municipalité ou une autre administration.

Fins visées

Enfin, il doit être raisonnable de considérer que le montant a été reçu pour l’une des fins visées au sous-alinéa 12(1)x)(iii) L.I.R. ou au sous-alinéa 12(1)x)(iv) L.I.R.

Le sous-alinéa 12(1)x)(iii) L.I.R. réfère à un paiement reçu à titre de paiement incitatif sous différentes formes. Quant au sous-alinéa 12(1)x)(iv) L.I.R. il réfère à un paiement reçu à titre de remboursement, de contribution ou d’indemnité ou à titre d’aide, sous différentes formes, notamment sous forme de prêt à remboursement conditionnel à l’égard, entre autres, d’une dépense effectuée ou engagée.

Réponse de l’ARC aux Questions 18 a) et 18 d)

Tout d’abord, la question de savoir si l’alinéa 12(1)x) L.I.R. est applicable à un contribuable donné, plus particulièrement dans le contexte du Programme, constitue une question de fait et de droit qui ne peut être résolue qu’après un examen complet de tous les faits, gestes, circonstances et documents pertinents entourant le contribuable et plus particulièrement à la convention de prêt intervenue entre celui-ci et son institution financière. Étant donné que l’énoncé relatif à la présente question ne comporte que très peu d’information, nous nous limiterons à formuler les commentaires généraux suivants à l’égard de l’application de l’alinéa 12(1)x) L.I.R. dans le contexte du Programme.

La partie du prêt, jusqu’à concurrence de 10 000 $, pouvant être radiée, doit être incluse en vertu de l’alinéa 12(1)x) L.I.R. dans le calcul du revenu tiré par la Société d’une entreprise ou d’un bien dans l’année d’imposition au cours de laquelle le montant emprunté du prêt a été reçu par la Société.

Réponse de l’ARC à la Question 18 b)

En considérant qu’en vertu du Programme, la partie remboursable du prêt sera reçue de l’institution financière de la Société en vertu d’un contrat de prêt, l’institution financière sera un payeur visé au sous-alinéa 12(1)x)(i) L.I.R. en tenant pour acquis que l’une des divisions 12(1)x)(i)(A), (B) ou (C) L.I.R. s’applique en l’espèce. Dans ces circonstances, le sous-alinéa 12(1)x)(ii) L.I.R. sera inapplicable.

Réponse de l’ARC à la question 18 c)

Compte tenu du contexte du Programme, il pourrait être raisonnable de considérer que la partie du prêt pouvant être radiée comme étant reçue à titre d’aide sous forme de prêt à remboursement conditionnel, à l’égard d’une dépense engagée ou effectuée par la Société, laquelle serait visée au sous-alinéa 12(1)x)(iv) L.I.R.

Réponse de l’ARC à la question 18 e)

La partie du prêt pouvant être radiée, à savoir le montant de 10 000 $ reçu par la Société, devra être incluse en vertu de l’alinéa 12(1)x) L.I.R. dans le calcul de son revenu tiré d’une entreprise ou d’un bien dans son année d’imposition se terminant le 31 décembre 2020 et ce, nonobstant le fait qu’un garant ait versé ou non un montant équivalant à l’institution financière prêteuse.

Le paragraphe 12(2.2) L.I.R. permet à un contribuable, qui reçoit au cours d’une année d’imposition un montant qui serait par ailleurs inclus en application de l’alinéa 12(1)x) L.I.R., d’effectuer un choix afin, d’une part, d’empêcher l’application de l’alinéa 12(1)x) L.I.R. et d’autre part, de réduire le montant d’une dépense engagée ou effectuée avant la fin de l’année d’imposition suivante – à l’exception d’une dépense relative au coût d’un bien pour le contribuable – de tout ou partie d’un montant reçu. Ainsi, le choix peut être fait à l’égard d’une dépense – déductible ou non – engagée dans l’année d’imposition, dans l’année d’imposition suivante ou dans toute année d’imposition précédente du contribuable (footnote 1).

La Société pourrait donc choisir de se prévaloir du choix prévu au paragraphe 12(2.2) L.I.R. à l’égard des dépenses de salaire effectuées au cours de son année d’imposition terminée le 31 décembre 2020. Le choix devra être soumis par la Société dans une lettre jointe à sa déclaration de revenus produite pour cette année.

La Société pourrait aussi effectuer le choix du paragraphe 12(2.2) L.I.R. à l’égard des dépenses de salaires engagées ou effectuées au cours de son année d’imposition terminée le 31 décembre 2021. Ainsi, le montant de 10 000 $ n’aura pas à être inclus en vertu de l’alinéa 12(1)x) L.I.R. dans le calcul du revenu de la Société pour son année d’imposition terminée le 31 décembre 2020. Le choix devra être soumis par la Société dans une lettre jointe à sa déclaration de revenus produite pour son année d’imposition terminée le 31 décembre 2021.

L’alinéa 20(1)hh) L.I.R. édicte, entre autres, qu’une somme remboursée par un contribuable au cours d’une année d’imposition, conformément à une obligation légale de rembourser tout ou partie d’un montant inclus en vertu de l’alinéa 12(1)x) L.I.R. dans le calcul du revenu du contribuable pour l’année ou pour une année d’imposition antérieure, est déductible dans le calcul du revenu tiré par le contribuable d’une entreprise ou d’un bien pour l’année.

Dans le cas d’un prêt consenti dans le cadre du Programme, hormis les cas de défaut prévus par ailleurs au contrat de prêt, la Société n’aurait généralement une obligation légale de rembourser le montant inclus par l’effet de l’alinéa 12(1)x) L.I.R. qu’à compter du 1er janvier 2023, à savoir la date où ce montant ne peut plus être radié et qui devra être remboursé d’ici le 31 décembre 2025.

Dans l’hypothèse où l’intention de la Société et de son institution financière est qu’à partir du 1er janvier 2023, tout remboursement partiel du principal du prêt sera appliqué en priorité à la partie du prêt initialement admissible à la radiation, la Société pourra se prévaloir de la déduction prévue à l’alinéa 20(1)hh) L.I.R. à l’égard d’un tel remboursement pour son année d’imposition au cours de laquelle le remboursement est effectué et ce, à l’égard de la totalité du montant du principal remboursé, jusqu’à concurrence du montant par ailleurs inclus en vertu de l’alinéa 12(1)x) L.I.R.

Dans l’hypothèse où l’intention des parties n’est pas précisée à cet égard, la Société pourra se prévaloir de la déduction prévue à l’alinéa 20(1)hh) L.I.R. pour son année d’imposition au cours de laquelle le remboursement est effectué à l’égard de la fraction du montant remboursé au cours de l’année par le rapport existant entre la partie du prêt initialement admissible à la radiation et le solde du prêt au 1er janvier 2023, étant donné le caractère fongible de l’argent emprunté. Selon cette approche, le montant total de la déduction prévue à l’alinéa 20(1)hh) L.I.R. correspondra au montant de l’inclusion en vertu de l’alinéa 12(1)x) L.I.R. à la fin du remboursement complet de l’emprunt de 40 000 $.

Sidi Ouattara
(450) 926-7687
Le 7 octobre 2020
2020-086293

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 AGENCE DU REVENU DU CANADA, Bulletin d’interprétation IT-273R2 (Archivé) « Aide gouvernementale – observations générales », 13 septembre 2000, paragraphe 14.

Summaries

Summary Under

Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(hh)

the parties can agree to allocate late CEBA loan repayments between the forgivable and non-forgivable loan components

A corporation received a $40,000 loan under the Canada Emergency Business Account (“CEBA”) program in its taxation year ending December 31, 2020, and used the proceeds to pay salary expenses incurred in that year or, alternatively, the following year. The loan (which initially is non-interest-bearing) might be repaid as required (i.e., 75% by December 31, 2022, so that $10,000 is forgiven), or might not be repaid until thereafter, in which case, the outstanding balance of the loan is converted into a three-year term loan at an annual interest rate of 5%. In describing the consequences, CRA indicated:

The financial institution making the loan would reasonably be viewed as a person described in s. 12(1)(x)(i), and the forgivable portion of the loan would be included in income for the corporation’s taxation year ended December 31, 2020 under s. 12(1)(z)(iv) as assistance in the form of a forgivable loan in respect of an outlay or expense (the salaries).
The corporation, to avoid the s. 12(1)(x) income inclusion, could file the s. 12(2.2) election with its income tax return for its 2020 taxation year to reduce the amount of non-deferrable operating expenses (“whether deductible or not”) incurred in that year, the subsequent year or a prior year.
Where the intent of the parties (the corporation and the financial institution) is that any amount repaid by the corporation will be applied first in repayment of the portion of the loan that was initially forgivable, the corporation could claim a deduction under s. 20(1)(hh) with respect to the amount reimbursed in the taxation year in which the reimbursement is made, up to the amount included in its income pursuant to s. 12(1)(x).
If the intent of the parties is unclear in that regard, the deduction under s. 20(1)(hh) would be equal to that proportion of the amount reimbursed in the taxation year that the portion of the loan that was initially forgivable is of the outstanding balance of the loan as at January 1st, 2023, due to the fungible character of the borrowed money. Under this approach, the total amount of the deduction under paragraph 20(1)(hh) will be equal to the amount of the income included under s. 12(1)(x) when the borrowing of $40,000 is fully reimbursed.

Summary Under

Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) - Subparagraph 12(1)(x)(iv)

bank lending under CEBA loan program is described in s. 12(1)(x)(i) and forgivable loan included on receipt

In commenting on the consequences of a corporation receiving a $40,000 loan under the Canada Emergency Business Account (“CEBA”) program, CRA indicated that the financial institution making the loan would reasonably be viewed as a person described in s. 12(1)(x)(i), and the forgivable portion of the loan would be included in income for the corporation’s taxation year of receipt under s. 12(1)(z)(iv) as assistance in the form of a forgivable loan in respect of an outlay or expense (the expenses funded by the loan).

Summary Under

Tax Topics - Income Tax Act - Section 12 - Subsection 12(2.2)

s. 12(2.2) can be applied to non-deductible expenses/consequences of CEBA loan not being forgiven

CRA provided more detailed comments on the consequences of a corporation receiving a $40,000 loan under the Canada Emergency Business Account (“CEBA”) program than those provided recently in 2020-0861461E5. Comments included:

The financial institution making the loan would reasonably be viewed as a person described in s. 12(1)(x)(i), and the forgivable portion of the loan would be included in income for the corporation’s taxation year ended December 31, 2020 under s. 12(1)(z)(iv) as assistance in the form of a forgivable loan in respect of an outlay or expense (the expenses funded by the loan).
The corporation, to avoid the s. 12(1)(x) income inclusion, could file the s. 12(2.2) election with its income tax return for its 2020 taxation year to reduce the amount of non-deferrable operating expenses (“whether deductible or not”) incurred in that year, the subsequent year or a prior year.
If the loan was not repaid as to at least 75% by December 31, 2022, so that the conditions for a forgiveness of $10,000 of the loan were not satisfied, there would be deductions under s. 20(1)(hh) as the forgivable (now, no longer forgivable) portion of the loan was repaid. In this regard, the corporation and the financial institution could agree that any amount repaid by the corporation would be applied first to repayment of the forgivable portion of the loan, so that immediate s. 20(1)(hh) deductions could be generated.
If there was no such agreement, repayments would be considered to be made pro rata as between the forgivable and non-forgivable portion of the loan, thereby stretching out the s. 20(1)(hh) deductions.

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7 October 2020 APFF Roundtable Q. 18, 2020-0862931C6 F - 12(1)(x) and CEBA

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Questions to the CRA

CRA Response

General Comments

Categories of payers

Purposes

CRA Response to Questions 18(a) and 18(d)

CRA Response to Question 18(b)

CRA Response to Question 18(c)

CRA Response to Question 18(e)