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:
Tax treatment of ex gratia payments that will be made by Veterans Affairs Canada to certain veterans or their surviving spouses, in respect of forced labour and suffering of the veterans as prisoners of the Japanese during the Second World War, and the unique brutality and horrors endured while incarcerated in Buchenwald Concentration Camp.
Position TAKEN:
The above ex gratia payments will not be included in the recipients’ income or taxable income and, accordingly, will not be subject to income tax.
Reasons FOR POSITION TAKEN:
These payments are not income “from a source” for purposes of the Act. It could also be argued that these payments are not taxable as they are on account of personal injury, or argued that they represent a windfall to the recipients.
B. Albert
Director, Legislation and Policy
Benefits Division 5-983339
Veterans Affairs Canada M. Azzi
P.O. Box 7700
Charlottetown, P.E.I.
C1A 8M9
December 23, 1998
Dear Sir/Madam:
Re: Ex Gratia Payments to Veterans
This is in reply to your letter of December 18, 1998, wherein you requested our views on the tax treatment of ex gratia payments that will be made by Veterans Affairs Canada to certain veterans or their surviving spouses.
We understand that this special compensation will be made to living Canadian veterans, or their surviving spouses, for the forced labour under inhumane conditions that the veterans were made to endure while prisoners of the Japanese during the Second World War. These recipients will receive nearly $24,000 each, which represents $18 per day of captivity, for the 44 months of suffering (including beatings and near starvation) and sacrifice of the veterans during the forced labour they endured. Using the same formula of $18 per day of captivity, Veterans Affairs Canada will also make an ex gratia payment to the surviving veteran or spouse of a small group of Canadian airmen for the 3 months in 1945 they spent exposed to unique brutality and horrors while incarcerated in Buchenwald Concentration Camp. You indicate that both these ex gratia payments will be made under the Ex Gratia Payments Order, 1991.
As you know, the Income Tax Act (the “Act”) taxes income by source, such as employment, business and property. As the above-described ex gratia payments are,
inter alia, not income from a source for purposes of the Act, they will not be included in the recipients’ income or taxable income and, accordingly, will not be subject to income tax.
We trust that these comments will be of assistance.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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