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.
Subject: Paragraph 115(1)(f) and Section 118.94 Your File No. 7849-3
This is in reply to your Memorandum dated January 30, 1991 whereby you requested our opinion as to whether gross self-employment income or net self-employment income should be used in determining whether all or substantially all of a non-resident's income for the year has been included in calculating his taxable income earned in Canada for the purposes of paragraph 115(1)(f) and section 118.94 of the Act. In connection therewith you also submitted for our comments the following example:
"A non-resident may have employment income earned in Canada, a loss from a business carried on in Canada, and income from a source outside Canada. If we use the "net" amount in the calculation of the 90 per cent rule (Canadian employment income minus Canadian business loss), the individual could be in a position where "all or substantially all" of the world income for the year is not from Canadian sources. On the other hand, if we use the gross amount of self-employed income in the calculation, it is clearly evident that the individual would meet the 90 per cent rule".
In our opinion, for purposes of determining whether all or substantially all of a non-resident's income for a taxation year has been included n computing his taxable income for purposes of paragraph 115(1)(f) and section 118.94 of the Act, the references to income (insofar as business income and employment income are concerned) are to net business income and net employment income respectively. However, losses should be disregarded and more particularly a loss from one source (e.g. a business) should not be netted against income from another source (e.g. from employment or from another business).
In your example set forth above, the issue is whether the (net) employment income earned in Canada constitutes all or substantially all of the sum of such (net) employment income and the non-resident's income from a source outside Canada. As indicated above, the loss from the business should be disregarded for this purpose.
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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