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.
Principal Issues:
Charitable organisation makes periodic payments to refugees during their first year in Canada. Are the payments taxable income and how should they be reported?
Position TAKEN:
Taxable under paragraph 56(1)(u) and must be reported on T5007.
Reasons FOR POSITION TAKEN:
Since the payments are made "on the basis of a means, needs or income test", the payments made by the charitable organisation would be considered social assistance for purposes of paragraph 56(1)(u) of the Act. Amounts reportable on form T5007 subject to certain exemptions.
September 26, 2000
Ottawa Tax Services Office HEADQUARTERS Business Window T. Young 952-1506 Attention: André Lessard 2000-002805
Payments by Church to Refugees
We are writing in reply to your May 19, 2000, memo concerning the taxation of payments made by a church to refugees. Furthermore, you have requested our views on whether such payments must be reported by the church. We also acknowledge our telephone conversation (Lessard/Young) of July 10, 2000, in which we obtained clarification of the circumstances in the situation.
You describe a situation in which a charitable organisation, in this case a church, sponsors refugees and pays them a set amount at regular intervals during the refugees' first year in Canada. The amounts are primarily intended to assist with living expenses. The payments are made pursuant to a needs test.
Our Comments
Paragraph 56(1)(u) of the Income Tax Act (the "Act") includes in income "a social assistance payment made on the basis of a means, needs or income test and received in the year...". Payments included under paragraph 56(1)(u) of the Act are deductible in computing taxable income in accordance with paragraph 110(1)(f) of the Act.
Since the term "social assistance" is not defined in the Act, one must look to the meaning of the term as it is ordinarily defined and understood, in order to determine whether paragraph 56(1)(u) of the Act applies in a particular situation. "Social assistance" or "social security" is defined in the Oxford English Dictionary (2nd Ed.) as a system whereby the state provides financial assistance for those citizens whose income is inadequate or non-existent owing to disability, unemployment, old age, etc. Section 18 of the Federal Provincial Fiscal Arrangements Act and a number of other Acts support the view that "aid made in any form to or in respect of a person in need" should be quantified as social assistance. In our view, social assistance payments are not limited to payments made by governments.
In our view, since the payments described above are made "on the basis of a means, needs or income test", the payments made by the charitable organisations would be considered social assistance for purposes of paragraph 56(1)(u) of the Act.
Since the charitable organisation is considered to be a person who makes a payment described in paragraph 56(1)(u) of the Act, for purposes of subsection 233(1) of the Income Tax Regulations (the "Regulations"), it would be responsible for issuing any required T5007 forms. Subsection 233(2) of the Regulations provides situations in which the prescribed form (T5007) is not required. Specifically, paragraph 233(2)(f) exempts payments paid in a particular year as part of a series of payments, the total of which does not exceed $500, and paragraph 233(2)(g) exempts a payment which is not part of a series of payments. Based on our understanding of your situation, most of the payments made by the charitable organisation would not fall within the exemptions described above and the prescribed form would, therefore, be required.
We trust our comments will be of assistance to you.
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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