6 September 1991 Ruling 901353 F - Meaning of Remuneration

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.

Re: Paragraph 115(2)(c) Meaning of Remuneration

This is in answer to your memorandum of June 20, 199O wherein you requested our comments on the meaning of the word remuneration for purposes of paragraph 115(2)(c) and (e) of the Income Tax Act (the "Act).  We apologize for the delay in our response to you.

The situation with which you are concerned involves the taxability of certain amounts paid by External Affairs to certain Canadian locally engaged employees.

24(1)

You query whether such "equalization" payments can be regarded as remuneration in respect of an office or employment for the purposes of paragraph 115(2)(c).

Black's law Dictionary defines remuneration as reward, recompense, salary, compensation.  It defines recompense as reward for services, remuneration for goods other than property.  Compensation is defined therein as indemnification; payment of damages; making whole; giving an equivalent or substitute of equal value; remuneration for services rendered, whether in salary, fees or commissions.  Furthermore, in the court cases cited below, the word remuneration has consistently been defined as consideration received for services rendered.

24(1)

21(1)(b)

24(1)

We recognize that based on Jurisprudence (see Ransom v. MNR 67 DTC 5235 at page 5243 and 5244, McNeill v. the Queen 86 DTC 6477 and the Queen v. Savage 83 DTC 5409 at 5413) that an argument can be made that a benefit or advantage conferred on an employee by the employer, the reimbursement of an employee by an employer for an amount paid by the employee or an allowance paid by an employer to an employee by reason of but not in the course of the employment does not fall within the meaning of the word remuneration.  It is also recognized that based on Hurd v. the Queen 81 DTC 5140 and Hale v. the Queen 90 DTC 6481) an argument can be made that a benefit taxable pursuant to paragraph 6(1)(a) may not qualify as remuneration for the purposes of 115(2)(c).  However, as indicated above we are of the view that the "equalization" payments are remuneration for services rendered and that such arguments will not prevail in this situation.  In addition this situation can be distinguished on its facts from those in the case cited above.  The distinguishing features in those cases include the following:

(1)     The taxpayer suffered a real economic loss (out of the pocket expenses), and

(2)     The taxpayer was obligated to meet certain conditions (move, pass a course) before an amount was paid to him, or

(3)     In the Hurd case the benefit was clearly taxable under other provisions of the law.

In conclusion we suggest that you advise the Department of External Affairs that the amounts paid are taxable in the hands of the recipients thereof.

Director GeneralRulings DirectorateLegislative and Intergovernmental Affairs Branch