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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether reporting of retiring allowance payments is required by a payer who is not the employer.
Position: Yes.
Reasons: Wording of the Act.
XXXXXXXXXX 5-982021
Fouad Daaboul
Attention: XXXXXXXXXX
October 28, 1998
Dear Sirs:
Re: Reporting and Withholding Tax under a Retiring Allowance
This is in reply to your letter of July 30, 1998, wherein you requested our views on the reporting requirements for retiring allowance payments made to an employee and the withholding tax in respect of these payments where the payer is a person other than the employee’s employer.
The term “retiring allowance” is defined in subsection 248(1) of the Income Tax Act (the "Act"), to mean “an amount ... received ... in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account of or in lieu of payment of, damages ... by the taxpayer ...”.
Pursuant to paragraph 153(1)(c) of the Act, every person paying a retiring allowance is required to deduct or withhold therefrom such amount as is determined in accordance with the Income Tax Regulations (the “Regulations”).
Sections 102 and 103 of Part I of the Regulations provide withholding tax rules regarding payments made by an employer that are considered remuneration to an employee. Subsection 100(1) of the Regulations define the following terms for purposes of Part I of the Regulations:
- “employee” means any person receiving remuneration,
- “employer” means any person paying remuneration, and
- “remuneration” includes any payment that is ...
(c) a retiring allowance.
It is our view that the person paying a retiring allowance, whether that person is the employer or not, is required to withhold tax. We also note, in support of this conclusion, that paragraph 15 of the IT-337R3 states “a person paying a retiring allowance is required to report the amount paid on form T4A Supplementary and, pursuant to paragraph 153(1)(c) of the Act, to withhold tax therefrom in such amount as is prescribed by Regulation”.
The reporting and withholding requirements pertaining to the payment of a retiring allowance are described on pages 43, 45, 47, 53 and 58 of the T4001(E) entitled "Employers' Guide to Payroll Deductions - Basic Information" 1997-1998.
We trust our comments will be of assistance to you.
Yours truly,
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings
and Interpretations Directorate
Policy and Legislation Branch
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