14 December 1999 Ministerial Letter 9923738 - WITHHOLDING TAX

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.

December 14, 1999

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your letter of July 22, 1999, addressed to his predecessor, the Honourable Herb Dhaliwal, concerning the prescribed rules referred to in subsection 153(1) of the Income Tax Act, and your request for a detailed explanation of section 104.1 of the Income Tax Regulations. As you may be aware, on November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

The prescribed rules referred to in subsection 153(1) of the Act are found in Part II of the Regulations and would be awkward and incomplete to use, in determining all the necessary payroll deductions. Instead, the CCRA publishes several guides and tables to assist employers in making payroll deductions. These tables calculate the payroll deductions required under the Income Tax Act, the Canada Pension Plan, and the Employment Insurance Act. The Employer's Guide to Payroll Deductions - Basic Information and the Payroll Deduction Tables for the Province of Alberta are available from the Tax Services Office serving your area. You can also obtain Tables on Diskette, an electronic version of the payroll deduction tables, which calculates payroll deductions for all pay periods. Tables on Diskette is available, free of charge, from your Tax Services Office or on the internet at: http://www. ccra-adrc.gc. ca.

In your letter you refer to section 104.1 of the Regulations which begins with the phrase: '"No amount shall be deducted or withheld from a payment made by a person during the lifetime of an annuitant referred to..." Section 104.1 of the Regulations was introduced in 1999 to give Canadians greater access to funds for retraining or for further education. To do this, section 104.1 of the Regulations allows individuals to make tax-free RRSP withdrawals without having any tax withheld at source if certain conditions are met.

You may have intended to refer to subsection 104(1) of the Regulations which states: "No amount shall be deducted or withheld from a payment in accordance with section 102 or 103 with respect to an employee who has filed with the employee's employer a return referred to in subsection 107(1) for a year claiming that the employee's income from employment for the year will be less than the claim amount for the year as reported on that return for the year."

The return referred to in subsection 107(1) of the Regulations is Form TD1, Personal Tax Credits Return. An employee must complete this form and submit it to the employer at the commencement of employment and anytime thereafter when a change occurs in the employee's status that may reasonably be expected to result in a change in the employee's personal credits for the year. The completed form helps the employer determine the correct amount of tax, if any, to withhold from the employee's salary or wages.

An employee enters claim code "E" on Form TD1 when the total of the employee's tax credits is more than their employment income for the year from all sources. In that situation, subsection 104(1) of the Regulations is the authority for an employer not to withhold tax from salary or wages of the employee.

Attached to your letter were copies of two Constructive Notices prepared by individuals claiming they are not persons under the Act and, consequently, are not subject to income tax. For purposes of the Act, a person is defined under subsection 248(1) of the Act as including corporations and exempt entities. Individuals are included in the definition of a person by virtue of the definition of individual under subsection 248(1) of the Act, which defines an individual as a person other than a corporation. The definition of a taxpayer under subsection 248(1) of the Act includes any person whether or not liable to pay tax. It is the Income Tax Act that obliges a person resident in Canada to pay income tax, not the filing of a tax return, as you suggest in your letter.

I have enclosed a copy of a News Release issued September 16, 1999, addressing several tax-filing myths that circulate from time to time.

I appreciate the opportunity to address your concerns.

Yours sincerely,

(Original signed by R. C. Shultis)

Bill McCloskey
Assistant Commissioner
Policy and Legislation Branch

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