Principal Issues: [TaxInterpretations translation] Could child care expenses qualify as child care expenses where the mother of a child is the sole shareholder and employee of the corporation providing child care?
Position: Yes.
Reasons: Legislative analysis.
XXXXXXXXXX
I. Landry, M. Fisc.
2011-041737
January 4, 2012
Dear Sir,
Subject: Child care expenses
This is in response to your email dated August 2, 2011 asking us whether child care expenses could qualify as child care expenses within the meaning of that expression in subsection 63(3) of the Income Tax Act (the "Act") where the mother of a child is the sole shareholder and employee of the corporation rendering child care services to that child. The corporation also carries on a child care business. You further specified that the child care expenses paid by the parents correspond to the fair market value of the child care services rendered.
All legislative references herein are to the provisions of the Act.
Our Comments
The situation that you submitted to us appears to be an actual situation for which we cannot give you a definitive opinion. However, we are able to offer the following general comments that may be helpful to you.
Child care expenses are defined in subsection 63(3). These expenses must be expenses incurred for the purpose of providing in Canada, for an eligible child of a taxpayer, child care services including baby sitting services, day nursery services or services provided at a boarding school or camp, provided that paragraphs (a) and (b) of the definition are satisfied, subject to paragraphs (c) and (d).
Under subparagraph (b)(i) of the definition, services cannot be provided by the father or mother of the child. However, there is nothing in the Act that prevents an individual from incorporating his or her business in order to provide child care services. Consequently, if a taxpayer satisfies all of the conditions for the application of section 63, the taxpayer may claim child care expenses as defined in subsection 63(3) even if the child care expenses were paid to a corporation to which the taxpayer is employed.
That conclusion would be different, however, if it were established in a specific situation that subsection 245(2) applies.
Also note that we have not analyzed the possible application of other provisions of the Act, including the application of paragraph 6(1)(a) or subsection 15(1).
As stated in Information Circular 70-6R5, this opinion does not constitute an advance income tax ruling and does not bind us.
Best regards.
Michel Lambert, CA, M. Fisc.
for the Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy
and Regulatory Affairs Branch