Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
February 11, 2000
XXXXXXXXXX
Dear Colleague:
Thank: you for your letter of November 15, 1999, concerning the small business deduction. As you know, on November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).
I understand that you share a constituent's concern with a newspaper article, a copy of which was attached to your letter, that indicates that a Canadian corporation is not entitled to this deduction in respect of income it earns for services provided outside of Canada.
The small business deduction is provided in section 125 of the Income Tax Act. One of the specific limits of this provision is that the deduction be based on the corporation's income from an active business carried on in Canada. Generally, a services business is carried on at the place where the services are performed. Accordingly, if a corporation performs its services outside Canada, the related income cannot qualify for the small business deduction.
The role of the CCRA is to administer and enforce the Act as passed by Parliament. The concerns raised in the above-noted article relate to tax policy, which is the responsibility of the Department of Finance. The newspaper article indicates that these concerns have already been relayed to the Honourable Paul Martin, Minister of
Finance, who confirmed the tax policy intent of the small business deduction. However, should your constituent wish to pursue his tax policy concerns further, he may contact the Tax Policy Branch of the Department of Finance by writing to L'Esplanade Laurier, 140 O'Connor Street, Ottawa, Ontario K1A 0G5.
I appreciate the opportunity to address these concerns.
Yours sincerely,
Martin Cauchon