Principal Issues: Whether an amount received by an individual from a foreign government would, in the circumstances described, be subject to tax in Canada.
Position: No
Reasons: The amount received would not be subject to tax.
2008-029324 XXXXXXXXXX A. Seidel (613) 957-2058 November 5, 2008
Dear XXXXXXXXXX :
Re: One-Time Payments
This is in reply to your e-mail of September 15, 2008 wherein you requested our views as to whether a Canadian resident individual would be required to include, in computing his/her income, a one-time payment received from the government of a foreign country in the circumstances described below.
You describe a situation where a foreign government proposes to make a one-time payment to each holder of the foreign country's resident card. The payment is being made to share the economic gains arising from the foreign country's buoyant economy in recent years with its resident cardholders. The foreign government will make the payment to each resident cardholder of the foreign country, regardless of whether they live inside or outside the foreign country.
Our Comments
The situation outlined in your letter relates to transactions that involve specific taxpayers. Where the transactions are proposed transactions, the specific taxpayers can request an advance income tax ruling. For more information about how to obtain an advance income tax ruling, please refer to Information Circular 70-6R5, "Advance Income Tax Ruling", dated May 17, 2002. This Information Circular and the other Canada Revenue Agency ("CRA") publications identified below can be accessed on the Internet at http://www.cra-arc.gc.ca. The review of completed transactions is the responsibility of the local tax services office. You should therefore submit all relevant facts and documentation to the appropriate tax services office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments.
In our view, a one-time payment made by a foreign government to a Canadian resident individual based solely on the fact that the individual has or had residential ties to a foreign country would not, in the circumstances described in your email, be subject to tax under the Income Tax Act.
We trust our comments have been of some assistance.
Yours truly,
Daryl Boychuk
Manager, International Tax Section I
International & Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch