Regarding the treatment of payments (“CERB Payments”) made pursuant to the Canada Emergency Response Benefit Act (the “CERB Act”) to an individual who was a non-resident of Canada for purposes of the Act and Art. IV of Canada’s Income Tax Conventions, the Directorate, after indicating that the CERB Payments were required by ss. 56(1)(r)(iv.1) and 115(1)(a)(iii.22) to be included in computing the taxable income earned in Canada of the non-resident, noted that Art. 15 (Employment Income) of a relevant Treaty will not govern the CERB Payments (there is no employer-employee relationship between the payor and the payee) and (analogously to employment insurance compensation) the “Other Income” Article of the relevant Treaty will apply to determine whether Canada can maintain its right to tax the CERB Payments. That Article in Canada’s treaties “is generally modeled on the ‘Other Income’ Article of the UN Model Treaty” and Canada has made a reservation to the “Other Income” Article of the OECD Model Treaty to reserve its right to tax income arising in Canada. The Directorate further stated:
Similar to employment insurance compensation paid by the Federal Government of Canada, it is our understanding that the CERB Payments constitute income arising in Canada. On that basis, Canada will generally have the right to tax CERB Payments without restriction.