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: Is there an aggregate or cumulative limit in respect of the AJCTC a taxpayer might claim in respect of an eligible apprentice?
Position: No. Only an annual limitation.
Reasons: The legislation.
2009-034946
XXXXXXXXXX James Atkinson CGA
(519) 457-4832
March 26, 210
Dear XXXXXXXXXX :
Re: Apprenticeship Job Creation Tax Credit
This is in response to your letter dated November 28, 2009 concerning the Apprenticeship Job Creation Tax Credit ("AJCTC") and the aggregate limit of amounts that may be claimed by a taxpayer as AJCTC in respect of the employment of an apprentice.
You have noted that CRA publications describe the AJCTC for a taxation year as a non-refundable tax credit equal to 10% of the eligible salaries and wages payable to eligible apprentices in respect of employment in the taxation year and after May 1, 2006. The maximum credit is $2,000 per year for each eligible apprentice. These limitations are found in the definition of "apprenticeship expenditure" in subsection 127(9) of the Income Tax Act ("Act"). It is noted that a taxpayer's AJCTC for a taxation year in respect of an eligible apprentice is meant to be a reference to the taxpayer's "apprenticeship expenditure" for the year in respect of the eligible apprentice.
Your question concerns whether the $2,000 credit limitation "per year" restricts the maximum AJCTC in respect of any one eligible apprentice to $4,000 in aggregate. You also note that the AJCTC for a taxation year of a taxpayer is calculated with reference to "eligible salary and wages" payable in the year to an "eligible apprentice" (terms that are defined in subsection 127(9) of the Act). You also note that, according to its definition, "eligible salary and wages" means salary and wages (excluding remuneration based on profits, bonuses, amounts described in section 6 or 7 of the Act, and amounts deemed to be incurred by subsection 78(4) of the Act) payable for an eligible apprentice's employment in Canada during the first 24 months of the apprenticeship.
You have asked us to consider the situation where the 24-month period of the apprenticeship contract straddles more than two taxation years of the employing taxpayer. You suggest that this is common, considering that the majority of apprenticeship contracts entered would not coincide with the employer's taxation year(s). Accordingly, it is your view that in most instances eligible salary and wages will be payable to an eligible apprentice in more than two taxation years by the employing taxpayer. Consequently, the maximum aggregate tax credit available in respect of a particular eligible apprentice might exceed $4,000, which would otherwise be the maximum if the $2,000 per year limit referred to in the definition of apprenticeship expenditure was available in only two years.
Our Comments
Subsection 127(5) of the Act provides for the deduction of certain investment tax credits, including the AJCTC, from a taxpayer's Part I tax otherwise payable.
The expression "apprenticeship expenditure" is defined in subsection 127(9) of the Act as follows:
"apprenticeship expenditure" of a taxpayer for a taxation year in respect of an eligible apprentice is the lesser of:
(a) $2,000, and
(b) 10% of the eligible salary and wages payable by the taxpayer in the taxation year to the eligible apprentice in respect of the eligible apprentice's employment, in the taxation year and on or after May 2, 2006, by the taxpayer in a business carried on in Canada by the taxpayer in the taxation year;"
The definition of "apprenticeship expenditure" caps the AJCTC available in respect of an eligible apprentice for any particular taxation year at $2,000.
Whether or not a taxpayer has an "apprenticeship expenditure" in any particular taxation year is determined with reference to the expression "eligible salary and wages," providing that the taxpayer employs an "eligible apprentice" to whom such eligible salary and wages are payable.
The expression "eligible salary and wages," as defined in subsection 127(9), means salary and wages payable by a taxpayer to an eligible apprentice in respect of the first 24 months of the apprenticeship contract (excluding remuneration that is based on profits, bonuses, amounts described in section 6 or 7 of the Act, and amounts deemed to be incurred by subsection 78(4) of the Act).
Depending upon the circumstances, a taxpayer may have more than two taxation years included during the 24-month period when eligible salary and wages are payable by that taxpayer to an eligible apprentice, such as might be the case where the apprentice's contract straddles the taxation years of the employing taxpayer or where a change of fiscal period/year end is permitted by the Minister. Therefore, a taxpayer might have an "apprenticeship expenditure" in more than two taxation years, which may result in an aggregate amount of AJCTC of more than $4,000.
The legislation is silent with respect to an aggregate or cumulative limit of AJCTC of $4,000, referenced in your letter. Consequently, we agree with your view that the aggregate credit in respect of an eligible apprentice might exceed $4,000 where sufficient eligible salary and wages are payable to the eligible apprentice during the first 24-month period of the apprentice's contract where the contract spans more than two taxation years of the employing taxpayer.
We trust that these comments will be of assistance.
Yours truly,
S. Parnanzone
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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