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.
Dear Sirs:
Re: Personal Services Business
This is in response to your letter dated January 2, 1991 requesting the Department's interpretation regarding the tax treatment of corporations considered to be personal services businesses.
Whether or not a particular corporation is a personal services business is a question of fact to be determined from an examination of all the facts, however, under paragraph 125(7)(d) of the Act, a corporation is considered to be carrying on a personal services business if among other factors an individual performs services on behalf of the corporation (the "incorporated employee") and the incorporated employee or a person related thereto owns 10% or more of the shares of the corporation and the incorporated employee would otherwise, but for the existence of the corporation, reasonably be regarded as an employee or officer of the person who received the services from the corporation, unless the corporation employed, throughout the year, more than five full time employees in the business or the services were performed for a corporation with which it was associated.
Thus where the corporation meets either one of the two exceptions stated above; it will not be considered to be carrying on a personal services business. See, however, the comments on this subject in Interpretation bulletin IT-73R4.
We trust these comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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