Revenue Canada Taxation Head Office
R. B. Day (613) 957-2136
May 26 1988
We are writing in reply to your letter of May 5, 1988, and further to ours of April 29, 1988, wherein you requested our views as to whether or not an employer is required to withhold tax on a payment of postjudgment interest flowing from a judgment for damages in a wrongful dismissal action.
Since the postjudgment interest is not considered to be remuneration from employment and does not constitute a retiring allowance, it is our opinion that subsection 153(1) of the Income Tax Act, would not require a withholding of tax from the payment of postjudgment interest. However, the requirements in section 201 and other relevant sections of Part II of the Income Tax Regulations must be followed with respect to the reporting of such interest payments.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch