Principal Issues: 1. Whether a natural person is subject to the Income Tax Act
2. Whether an employer must obtain the Social Insurance Number for a natural person in his or her employ.
Position: 1. Yes
2. Yes
Reasons: 1. Subsection 2(1) of the Act
2. Section 237 of the Act
XXXXXXXXXX 2007-023453
September 17, 2007
Dear XXXXXXXXXX:
Re: Natural Persons
This is in response to your correspondence of April 27, 2007 and June 12, 2007, inquiring about the right of a natural person not to be subject to the Income Tax Act (the "Act"). You also questioned whether you are required to obtain the Social Insurance Number (SIN) of a natural person in your employ. We apologize for the delay in response.
The belief that "natural persons" are not subject to the Act is derived from the misconception that the Act applies only to corporations. However, the courts have consistently supported the application of the Act to natural persons. We note, for example, that subsection 2(1) of the Act states, "An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year." The term "person" is used in the Act to refer to individuals and corporations as well as trusts. Although the Act does not specifically define a "natural person", Black's Law Dictionary, Seventh Edition, defines it to mean "a human being, as distinguished from an artificial person created by law."
Therefore, the Act applies to every resident of Canada (artificial or natural) on his or her taxable income earned in Canada or abroad during a particular year. Pursuant to subsections 150(1) and (1.1) of the Act, every such individual must file a return if he or she owes taxes for the year; has a capital gain for the year; disposes of capital property during the year; or has an outstanding balance under the home buyer's plan or life long learning plan legislation. Failure to file a return could lead to fines and penalties in addition to interest on the balance of tax outstanding.
To answer your specific question regarding a SIN, the SIN is an authorized number for income tax purposes under section 237 of the Act and is also used to identify an individual for employment and government benefit programs. Information slip preparers (such as a T3, T4, or T5 slip) or employers are required to obtain the SIN of individuals employed in pensionable or insurable employment. If an employee refuses to give his or her SIN, the preparer should be able to show that a reasonable effort was made to obtain it. Failure to make a reasonable effort to acquire a SIN may be subject to a penalty of $100 for each failure. Likewise, if an employee declines to provide a SIN, under subsection 162(6) of the Act he or she may be subject to a penalty of $100 for each failure.
We trust that these comments will be of assistance.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch