Income Tax Severed Letters - 2021-06-30

Ministerial Correspondence

3 July 2020 Ministerial Correspondence 2020-0851781M4 - CEWS and First Nation Businesses

Unedited CRA Tags
149(1)(c)

Principal Issues: Are First Nations and business's run directly by a First Nation eligible entities for purposes of the CEWS

Position: No, First Nations are public institutions for the purposes of CEWS and are not eligible entities. In addition, an unincorporated business/enterprise directly operated by an Indian band is not an eligible employer as the band itself would be considered the employer.

Reasons: All Indian bands (First Nations) created under the Indian Act meet the criteria to be considered municipal or public bodies performing a function of government in Canada under paragraph 149(1)(c).

Technical Interpretation - External

21 January 2021 External T.I. 2020-0873101E5 - CEWS and the OBPTC

Principal Issues: Whether the Canada Emergency Wage Subsidy would meet the exception in paragraph (b) of the definition of "government assistance" under the Ontario Book Publishers Tax Credit?

Position: No, CEWS is a subsidy, not a grant. Therefore it does not meet the noted exception.

Technical Interpretation - Internal

24 December 2020 Internal T.I. 2020-0874951I7 - Change to FPE for CEBA

Unedited CRA Tags
Change to FPE for CEBA, 249, 249.1, 152
Summary Under
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(1)
fiscal period is not set until assessed
Summary Under
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7)
a corporate taxpayer can reset its first taxation year end after it has filed its first return and before it has been assessed

Principal Issues: 1. Does subsection 249.1(7) of the Income Tax Act (Act) allow the Minister to allow a taxpayer’s request to retroactively (for the year that has passed) change the taxpayer’s FIRST fiscal period end (FPE) where the taxpayer's return is already assessed?
2. If the answer is no, would it change where the return is filed but not assessed?

Position: 1. No
2. Yes

Reasons: 1. Where a taxation year has already been assessed on the basis of a fiscal period end, the Act does not have any provision that allows it to reassess to change the FPE.
2. Subsection 249.1(1) allows specific taxpayers to choose their fiscal period for filing their first tax return for the purpose of assessment. Accordingly, where a return has not been assessed, in our view, there is flexibility for the taxpayer to change the FPE.

9 July 2020 Internal T.I. 2020-0854701I7 - Withholdings from CERB/CSB payments

Unedited CRA Tags
153(1), Regulations 100, 102, 103
Summary Under
Tax Topics - Income Tax Regulations - Regulation 102 - Subsection 102(1)
CERB and CESB payments are deemed remuneration for source deduction purposes
Summary Under
Tax Topics - Income Tax Regulations - Regulation 100 - Subsection 100(4)
there is a deemed establishment of a deemed employer of a deemed employee where s. 56(1)(r) government assistance is paid
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)
CERB and CESB payments are government assistance

Principal Issues: Does Regulation 102 applies for the purposes of withholding from CERB/CSB payments?

Position: Yes.

Reasons: CERB/CSB payments meet the criteria laid out under subsection 102(1) of the Income Tax Regulations. In addition, the deeming provision under subsection 100(4) of the Regulations applies where the payee does not report to an establishment of the payor. For explanation, see the response below.