Income Tax Severed Letters - 2026-03-04

Technical Interpretation - External

26 February 2026 External T.I. 2026-1088301E5 - Subsection 61(2) return where no DMTT is payable

Unedited CRA Tags
60(1); 60(2); 61(2); 61(3) of the GMTA

Principal Issues: Whether a subsection 61(2) return is required to be filed for a fiscal year in which no DMTT is payable in respect of any Canadian constituent entity of a qualifying MNE group.

Position: Where no DMTT is payable in Canada for the fiscal year, a return under subsection 61(2) should not be required to be filed.

Reasons: Context of the GMTA, relevant information already included in the GIR.

6 November 2025 External T.I. 2025-1078851E5 - Social Service Workers in Ontario

Unedited CRA Tags
Section 118.4 ITA; Subsection 118.4(2) ITA; Social Work and Social Service Work Act, 1998, S.O. 1998, c. 31; Regulated Health Professions Act, 1991, S.O. 1991, c. 18

Principal Issues: Whether Registered Social Service Workers in Ontario are authorized medical practitioners for purposes of the medical expense tax credit.

Position: Yes.

Reasons: As of August 15, 2000, the Social Work and Social Service Work Act, 1998, enables, permits, and empowers Social Service Workers in Ontario who are members of the Ontario College of Social Workers and Social Service Workers to perform medical services. As of December 30, 2017, Social Services Workers who are competent and authorized may perform the controlled act of psychotherapy under the Regulated Health Professions Act.

5 November 2025 External T.I. 2020-0868261E5 - Article XXI Exemption

Principal Issues: Whether US resident non-profit organizations (the NPOs”) are exempt from Canadian withholding tax under the Canada-U.S. Income Tax Treaty (“the Treaty”) with respect to rental income and timber royalty derived through a chain of partnerships that are treated as transparent for Canadian and U.S. income tax for the purposes?

Position: Generally, yes.

Reasons: The income will be considered to be derived by the partners, the NPOs, when determining whether Article XXI of the Treaty is applicable in respect of this income. Provided that the income is exempt from tax in the United States, is not from carrying on a business and is not from a related person (other than related persons referred to in Articles XXI(1), (2) or (3)), the royalties and rent should not be subject to Canadian withholding tax.

2 September 2025 External T.I. 2022-0945251E5 - Application of subsection 126(7)

Unedited CRA Tags
3; 5(1); 6(1); 7(1); 126; 126(1); 126(7) "non-business-income tax"; Canada-US Tax Treaty
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(7) - Non-Business-Income Tax
the US excise tax on parachute payments is not an income tax
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 2
US excise tax on parachute payments was not a federal income tax or substantially similar tax

Principal Issues: Whether the excise tax levied under §4999 of the IRC (tax on an excess parachute payment) meets the conditions to be considered a “non-business-income tax” under subsection 126(7) of the Income Tax Act?

Position: No.

Reasons: The tax is not levied on net income and relief under the Canada-US Tax Treaty is not available.

28 August 2025 External T.I. 2022-0929921E5 - Application of subsection 212.3(1)

Unedited CRA Tags
212.3(1), 212.3(2), 212.3(10), 212.3(11), 212.3(16), 212.3(18), 248(10)
Summary Under
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(1)
FAD rules applied where the controlling individual emigrated as part of the series involving a CRIC-to-CFA loan

Principal Issues: Whether the conditions in paragraphs 212.3(1)(a) and (b) are met in the case of an investment made by a Canadian resident corporation in a foreign corporation if the Canadian resident corporation was controlled by an individual resident in Canada at the investment time but that person later emigrated to a foreign jurisdiction as part of the same series of transactions or events.

Position: Yes, the conditions of paragraphs 212.3(1)(a) and (b) are met since the investment and emigration are presented in the facts provided as being part of the same series of transactions or events.

Reasons: Based on the wording of the provision.

Technical Interpretation - Internal

16 January 2026 Internal T.I. 2024-1029241I7 - FHSA and Individuals registered under the IA

Unedited CRA Tags
81(1)(a); 146.6; 204.2; section 87 of the IA

Principal Issues: What is the tax treatment of first home savings account ("FHSA") contributions and withdrawals by a First Nation individual who qualifies for the tax exemption under section 87 of the Indian Act (the "IA")?

Position: Administratively, the portion of FHSA contributions that were not deducted as they pertain to exempt income under the IA are not included in income on withdrawal, even where such withdrawals do not constitute "qualifying withdrawals". It is a question of fact whether the investment income portion of such withdrawals is situated on a reserve and thus exempt from tax under the IA.

Reasons: Prior positions, interpretation of the legislation.

30 October 2025 Internal T.I. 2025-1068441I7 - EIFEL – RAIFE and IFE, Var. A & B

Unedited CRA Tags
18.2, 95(2)(f.11)(ii)(D).

Principal Issues: Whether the limitation rule in subclause 95(2)(f.11)(ii)(D)(I) applies to the CFA’s relevant affiliate interest and financing expenses (which generally refers to the affiliate’s interest and financing expenses obtained by subtracting variable B from variable A determined without regard to paragraph (j)), or to amounts each of which would be determined for variable A (without regard to paragraph (j)) in the definition of interest and financing expenses for the CFA?

Position: The limitation rules of subclause 95(2)(f.11)(ii)(D)(I) applies to amounts each of which would be determined for variable A (without regard to paragraphs (h) and (j)) in the definition of interest and financing expenses for the CFA.

Reasons: Wording of the Act.

3 February 2025 Internal T.I. 2021-0885561I7 - TPCA and TPIA

Unedited CRA Tags
247; 3; 15; 214(3); 56(2); 214(3); 246(1)(b)

Principal Issues: When there is a transfer pricing adjustment which increases the proceeds of disposition of a non-depreciable asset under subsection 247(2) of the Act, whether or not there is an inconsistency for the transfer pricing penalty under subsection 247(3) and the secondary adjustment under subsection 247(12), compared to a transfer pricing adjustment which reduces the adjusted cost base under subsection 247(2) of the Act?

Position: There is an inconsistency for the deemed dividend under subsection 247(12) of the Act since a transfer pricing income adjustment that increases the proceeds of disposition of a non-depreciable asset would only be for the amount of the taxable capital gain in the example provided.

Reasons: Wording of the legislation.