Cases
The Queen v. Albino, 94 DTC 6071, [1994] 1 CTC 205 (FCTD)
In 1973, the taxpayer agreed to participate in an "incentive performance plan" of his employer under which the taxpayer was granted "share equivalent units" from time to time which "vested" between five and ten years after the date of granting and which provided for payments being made only upon the taxpayer ceasing to be an employee. Given that one of the two objectives of the plan was to provide an incentive for important employees to remain with the company (the other being to provide an incentive for such employees to continue devoting their energies towards the continued growth of the company), a lump-sum in excess of $600,000 received by the taxpayer when he was terminated by the company in 1987 was a retiring allowance rather than remuneration under ss.6(3) and 5(1) and, therefore, was subject only to tax in accordance with s. 212(1)(j.1) of the Act.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Retiring Allowance | 145 | |
| Tax Topics - Statutory Interpretation - Specific v. General Provisions | 57 |
Administrative Policy
20 March 2015 External T.I. 2014-0534301E5 - Canadian Withholding Tax on Retiring Allowance
A lump sum payment in respect of a loss of employment is made by Canco to a non-resident of Canada (the "Taxpayer") who had been seconded to a wholly-owned French subsidiary of Canco ("Franceco"). The payment is equal to the cost of early termination of the employment of the taxpayer with Franceco. Would this retiring allowance be taxable under s. 115(2)(e)(i) or s. 212(1)(j.1)?
CRA first found that s. 212(1)(j.1) would apply, so that it would not be taxable pursuant to s. 115(2)(e)(i) and that the exclusion in s. 212(1)(j.1) would not apply because "it would not be reasonable to regard such… payment as being attributable to services rendered to…Canco." However it would be exempt under Art. XV of Canada-France Convention, as not being in respect of employment exercised in Canada, or Art. XXI as not being derived from sources in Canada.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 115 - Subsection 115(2) - Paragraph 115(2)(e) - Subparagraph 115(2)(e)(i) | retiring allowance paid to non-resident for loss of non-resident employment | 56 |
| Tax Topics - Treaties - Income Tax Conventions - Article 15 | retiring allowance paid to French individual for loss of non-resident employment | 73 |
| Tax Topics - Treaties - Income Tax Conventions - Article 22 | retiring allowance paid to French individual for loss of non-resident employment | 73 |
19 March 2002 External T.I. 2002-0120785 F - Allocation de retraite - 212(13)(d)
An individual worked for 10 years in Canada for a Canadian corporation, then ceased to be resident and worked the next 12 years for a sister U.S. corporation with no Canadian taxable income. While still a non-resident, the individual received a retiring allowance from the U.S. corporation in recognition of the services he had rendered to it and the Canadian corporation. After referring to the deeming rule in s. 212(13)(d), CCRA stated that to the extent that a portion of this retiring allowance were invoiced to the Canadian corporation by the non-resident U.S. corporation:
the portion so invoiced would be subject to Part XIII tax pursuant to paragraph 212(1)(j.1) to the extent that it related to services rendered by the non-resident individual during taxation years in which the individual either resided in Canada or was employed in Canada. In such a case, both the Canadian corporation and the U.S. corporation would be responsible for withholding or deducting the applicable tax (the Canadian corporation as the payer and the U.S. corporation as the payer's agent) pursuant to subsections 215(1) and (2).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 215 - Subsection 215(2) | s. 215(2) applicable to retiring allowance paid by US employer where it invoiced the sister Canadian corporation, as the predecessor employer, therefor | 177 |