17 November 2022 External T.I. 2022-0930451E5 - Requirement to issue T4A slips

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.

Principal Issues: 1. Is there a requirement for a non-profit corporation to file T4A slips in respect of fees paid to individuals for services provided to the corporation?

2. Can the non-profit corporation be liable for any taxes, penalties or interest resulting from the failure to file the T4A slips?

3. Are the directors of a non-profit corporation liable, pursuant to section 227.1 of the Act, for the penalties resulting from the failure to file the T4A slips?

4. Can section 238 of the Act apply to the failure to file T4A slips?

Position: 1. Yes.

2. Yes, the corporation would be subject to penalties and interest.

3. No.

4. Yes, under certain conditions only.

Reasons: 1. Subsection 200(1) of the Income Tax Regulations requires that T4A slips be filed when fees are paid to individuals who provide services to a corporation and where the fees paid in respect of an individual are in excess of $500 in a calendar year.

2. The Income Tax Regulations do not require that tax be deducted or withheld in respect of a payment described in paragraph 153(1)(g) of the Act. Therefore, the failure to issue T4A slips would not result in the corporation being liable for taxes. However, the failure to issue T4A slips makes the corporation liable for penalties under subsections 162(7), (7.01) and (7.02) as well as interest on these penalties pursuant to subsection 161(11).

3. Subsection 227.1(1) of the Act only applies where an amount is required to be deducted, withheld or remitted by a corporation pursuant to section 153 of the Act, the directors of a non-profit organization could not be liable under section 227.1 of the Act.

4. Section 238 of the Act requires a conviction by a provincial court. In order for a taxpayer to be convicted of an offence, provincial courts take the position that the CRA needs to serve a notice of requirement pursuant to section 231.2 of the Act and that the taxpayer fails to comply to such a notice.

XXXXXXXXXX							2022-093045
P. Girard, LL.B, M. Tax.

November 17, 2022

Dear XXXXXXXXXX:

Re: Requirement to issue T4A information slips

Every reference herein to a part, section or subsection, paragraph or subparagraph and clause or subclause is to the relevant provision of the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.) (the Act), as amended from time to time and consolidated to the date of this letter and each reference to a technical tax term has the same meaning as such term has in the Act.

This is in reply to your letter dated March 4, 2022 in which you requested a technical interpretation with respect to the requirement for a non-profit corporation to issue T4A slips to independent contractors as well as the consequences attached to the failure to issue said slips.

In particular, you presented the following facts:

• A recreational sports league is incorporated as a non-profit corporation under the laws of the province of Ontario;
• The non-profit corporation primarily operates a youth baseball league in Ontario, which is divided in two main divisions, the “House League” division and the “Rep and Select” division;
• Games are officiated by accredited officials who are also registered with the Ontario Baseball Association (“Officials”);
• The Officials are all residents of Canada;
• The non-profit corporation and the Officials enter into contracts for services such that the relationship between the parties is one of independent contractor relationship; and
• The non-profit corporation pays the Officials for their services but does not deduct or withhold any amount on the payments made to them.

In light of the above mentioned facts, you asked the following questions:

1. Are T4A slips required to be made in respect of the fees paid to the Officials, where the amounts, on an individual basis, are in excess of $500 per calendar year?

2. Can the non-profit corporation be liable for any taxes, penalties or interest resulting from the failure to make T4A slips?

3. Can the directors of the non-profit corporation be liable, pursuant to section 227.1, for the penalties resulting from the failure to make the T4A slips?

4. Is the offence under section 238 applicable to a failure to make a T4A slip?

Our comments

Your correspondence relates to a factual situation, involving a specific taxpayer. Written confirmation of the tax implications inherent in particular transactions is given by the Income Tax Rulings Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R11, Advance Income Tax Rulings and Technical Interpretations, dated April 1, 2021. Given that your enquiries are primarily administrative in nature we are, however, prepared to offer the following general comments, which may be of assistance.

Every person making a payment listed in subsection 153(1) at any time in a taxation year shall deduct or withhold from the payment the amount determined in accordance with the rules provided for in Part I of the Income Tax Regulations (“Regulations”). According to the facts provided as described above, the fees paid to the Officials would, in our view, be amounts referred to in paragraph 153(1)(g), which includes fees, commissions or other amounts for services. Where such fees are paid to individuals who are resident in Canada, the Regulations do not provide an obligation for the payer to deduct, withhold and remit tax in respect of these payments.

However, despite the absence of any requirement to deduct or withhold tax on amounts referred to in paragraph 153(1)(g), the payer of the fees, commissions or other amounts for services must follow the requirements provided by subsection 200(1) of the Regulations. More precisely, every person who makes a payment described in subsection 153(1) shall make an information return in prescribed form unless the information return is in respect of a payment made under section 202, 214, 237 or 238. The prescribed form required to be made is the T4A, Statement of Pension, Retirement, Annuity, and Other Income (T4A).

Where the fees for services paid in a calendar year are less than $500 and no tax was deducted or withheld on the amounts paid to the recipient, administrative relief is provided to payers and exempts them from the requirement in subsection 200(1) of the Regulations. Similarly, a T4A slip is not required in situations where services are rendered to an individual in a personal capacity by a professional or any other person who carries on an occupation, or where the services are rendered for the repair or maintenance of an individual’s principal residence. This relief is not applicable to the situation at hand.

A failure to make the required T4A slips in respect of the fees paid to the Officials could result in the application of penalties. First, a person who fails to make an information return as and when required by the Act is subject to the penalty in paragraph 162(7)(a). In addition, given that the T4A slip is a prescribed information return pursuant to subsections 205(3) and 205.1(1) of the Regulations, the late-filing penalties provided for in subsections 162(7.01) and 162(7.02) could also apply cumulatively.

In addition to the penalties levied under section 162, interest on the penalties could be applicable pursuant to subsection 161(11), at the prescribed rate computed from the day on or before which the T4A slips were required to be made until the payment is received.

It is worthwhile to note that not all failures of a payor to make the required T4A slip for a payment described in paragraph 153(1)(g) results in the payor’s liability to pay the recipient’s taxes. As previously mentioned, the Regulations do not require any deduction or withholding on the amounts described in paragraph 153(1)(g), unless the fees, commissions or other amounts for services rendered in Canada are paid to a non-resident. Based on the facts described above, this is not the situation at hand.

Subsection 227.1(1) provides that the directors of a corporation are jointly and severally, or solidarity liable with the corporation to pay taxes, interest or penalties where the corporation has failed to deduct or withhold an amount as required by several provisions of the Act, including section 153. Where, as is the case in the situation at hand, a corporation is not required to deduct or withhold any amount pursuant to subsection 153(1), no liability would lie with the directors of the corporation.

Finally, with respect to the offences under section 238, a person who has failed to file or make a return as and when required by or under the Act or Regulations is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to a fine and/or imprisonment. The provisions of section 238 may apply to the requirement to make an information return, such as a T4A slip, under subsection 153(1). However, for a taxpayer to be found guilty of an offence under section 238, prosecution in a provincial court is required. While the broad wording of subsection 238(1) applies to a failure to file or make a return as and when required, the provincial courts require the CRA to have served the taxpayer with a Notice of Requirement under section 231.2, in respect of which the taxpayer failed to comply.

We trust these comments will be of assistance.

Yours truly,

Gillian Godson
A/Manager, Administrative Law Section
Specialty Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch