Principal Issues: [TaxInterpretations] Can the taxpayer, resident in Canada, deduct amounts paid as child support to his former spouse who is a non-resident?
Position: No. Child support paid by the taxpayer cannot be deducted in the calculation of his income.
Reasons: The same provisions apply whether the recipient is resident in Canada or not. The taxpayer cannot rely on Article 18 (XXXXXXXXXX) of the Convention to claim a deduction in computing his income as child support that is denied to him by virtue of Canadian law because that support was paid to his former spouse who is subject to XXXXXXXXXX taxation on said amounts received.
XXXXXXXXXX Danielle Bouffard 2011-041588 November 15, 2011
Dear Sir,
Subject: Child support
This is in response to your letter of July 15, 2011, which we received on August 2, in which you asked whether amounts paid by a taxpayer to the taxpayer’s former spouse as child support can be deducted in the calculation of the taxpayer’s income since the ex-spouse was taxed XXXXXXXXXX on those amounts.
Unless otherwise indicated, all statutory references below are to the provisions of the Income Tax Act, RSC 1985 (5th Supplement), c.1, as amended (the “Act").
You indicated that a divorce judgment issued in Quebec in 2005 confirms the terms of the accessory measures which specified that the taxpayer must pay a monthly support to the ex-spouse for the exclusive benefit of their minor child. The ex-spouse and child live in XXXXXXXXXX. The taxpayer was resident in Canada at the time of the divorce judgment but returned to live in XXXXXXXXXX.
The ex-spouse paid XXXXXXXXXX taxes on the child support received from the taxpayer and the taxpayer did not deduct such amounts in computing the taxpayer’s income for the purposes of the Act.
The taxpayer referred to paragraph XXXXXXXXXX of Article XVIII of the Tax Convention between Canada and XXXXXXXXXX ("the Convention") to argue that he could deduct the amounts paid. Article 18 (XXXXXXXXXX) of the Convention reads as follows:
"[A]limony and other similar payments arising in a Contracting State [e.g. Canada] and paid to a resident of the other Contracting State [e.g., XXXXXXXXXX] who is subject to tax therein in respect thereof shall be taxable only in that other State (XXXXXXXXXX).
Our Comments
The term "support amount" is defined in subsection 56.1(4). Support amount is an amount that has the following characteristics:
- It is payable to the recipient;
- It is payable as an allowance for the maintenance of the recipient, children of the recipient or both the recipient and children of the recipient
- It is payable on a periodic basis;
- the recipient has discretion as to the use of the amount; and as the case may be:
- the recipient is, inter alia, the former spouse of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage and the amount is receivable under an order of a competent tribunal or under a written agreement; or
- the payer is a legal parent of a child of the recipient and the amount is receivable under an order made by a competent tribunal in accordance with the laws of a province.
For the purposes of the Act, a support amount is generally deductible by the payer and must generally be included in the recipient's income. However, in the case of child support, that is, support that is not solely for the support of the recipient (for example, the former spouse of the payer), no deduction is available to the payer and there is no taxation to the payee.
Based on our analysis above, we have determined that child support is a support amount pursuant to section 56 which, however, cannot be deducted in computing the income of the payer by virtue of paragraph 60(b) and that is not subject to taxation to the recipient for the purposes of paragraph 56(1)(b).
For more information, see Interpretation Bulletin IT-530R - Support Payments - which deals with the deductibility of support payments and the specific conditions that must be met in order to allow the deduction.
To qualify for tax relief under Article 18 (XXXXXXXXXX) of the Convention, a taxpayer must demonstrate that the taxpayer would have had to pay tax on the same amount in both jurisdictions where the Convention applies. In this case, the taxpayer is the payer of child support to a non-resident person. As a result, he is not subject to Canadian tax on child support and is not entitled to a deduction in respect of that support.
As specified elsewhere in Guide P102 Support Payments - Including Form T1158:
If you are a resident of Canada who makes support payments to a non-resident, you do not have to withhold tax on the payments. You can deduct the payments from your income if they constitute support payments under the conditions listed above [that do not apply to child support]
You can consult this guide at the following address: http://www.cra-arc.gc.ca/E/pub/tg/p102/p102-e.html#tphp.
Consequently, the taxpayer cannot rely on Article 18 (XXXXXXXXXX) of the Convention to claim a deduction in the computation of his income for child support that was denied to him by virtue of Canadian law because that support was paid to his ex-spouse who is subject to XXXXXXXXXX taxation on such amounts received.
We hope that these comments are of assistance.
Best regards,
François Bordeleau, Advocate
Manager
Business and Partnerships Section
Income Tax Rulings Directorate