,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,numb]3 ,,it-#aji;,r#b
,date3 ,april #bc1 #aiic
,subject3 ,9come ,tax ,act--,unpd ,am.ts
,ref];e3 ,sec;n #gh 7al ,"p ,,xiii1
  sec;ns #ba1 #hj1 #aej1 subsec;ns
  #ah7#i71 #ff7#ae71 #ff.a7#f71
  #ff.b7#e71 #ff.d7#e71 #hh7#a71
  #aeb7#d7 & #bdh7#a7 def9i;n ( 8sal>y
  def]ral >range;t01 & p>agraphs
  #ab7#a77i71 #ah7#a77e71 #bj7#a77l71
  7n71 & 7p77

  ,at ! ,canada ,cu/oms & ,rev5ue ,ag5cy
7,,ccra71 we issue 9come tax 9t]pret,n
bullet9s 7,,it's7 9 ord] 6provide
te*nical 9t]pret,ns & posi;ns reg>d+
c]ta9 provi.ns 3ta9$ 9 9come tax law4
,due 6_! te*nical nature1 ,,it's >e us$
prim>ily 0\r /aff1 tax speciali/s1 & o!r
9dividuals :o h an 9t]e/ 9 tax        #a
             ,,it-#aji;,r#b          a#a
matt]s4 ,= ^? r1d]s :o pref] a less
te*nical explan,n (! law1 we (f] o!r
public,ns1 s* z tax guides & pamphlets4
  ,:ile ! -;ts 9 a "picul> p>agraph 9 an
,,it may relate 6provi.ns (! law 9 =ce
at ! "t !y 7 made1 s* -;ts >e n a
sub/itute =! law4 ,! r1d] %d1 "!=e1
3sid] s* -;ts 9 li<t (! relevant
provi.ns (! law 9 =ce =! "picul> tax,n
ye> 2+ 3sid]$1 tak+ 96a3.t ! e6ect ( any
relevant am5d;ts 6^? provi.ns or
relevant c\rt deci.ns o3urr+ af ! date
on : ! -;ts 7 made4
  ,subject 6! abv1 an 9t]pret,n or
posi;n 3ta9$ 9 an ,,it g5],y applies z
(! date on : x 0 publi%$1 un.s o!rwise
specifi$4 ,if "! is a subsequ5t *ange 9
t 9t]pret,n or posi;n &! *ange is
b5eficial 6taxpay]s1 x is usu,y e6ective
= future assess;ts & reassess;ts4 ,if1
on ! o!r h&1 ! *ange is n fav\ra#
6taxpay]s1 x w norm,y 2 e6ective =!
curr5t & subsequ5t tax,n ye>s or =
                                      #b
             ,,it-#aji;,r#b          b#a
transac;ns 5t]$ 96af ! date on : ! *ange
is publi%$4
  ,mo/ ( \r public,ns >e availa# on \r
,web site at3 _+www.ccra.gc.ca_:
  ,if y h any -;ts reg>d+ matt]s 4cuss$
9 an ,,it1 pl1se s5d !m to3

  ,manag]1 ,te*nical ,public,ns &
    ,projects ,sec;n
  ,9come ,tax ,rul+s ,directorate
  ,policy & ,legisl,n ,bran*
  ,canada ,cu/oms & ,rev5ue ,ag5cy
  ,ottawa ,,on ,k#a;,a #j;,l#e
  
or 0email at ! foll[+ a4ress3
_+bulletins@ccra.gc.ca_:







                                      #c
                 ,3t5ts              c#a
    
,applic,n
,summ>y
,4cus.n & ,9t]pret,n
  ,unpd ,am.ts 7,o!r ,?an ,unpd
    ,employee ,remun],n & ,o!r ,am.ts7
    7p>agraphs #a-e7
  ,fil+ an ,agree;t 7p>agraphs #f-i7
  ,unpd ,employee ,remun],n & ,o!r
    ,am.ts 7p>agraphs #aj-ad7
  ,pro#ms ,9volv+ ,sec;n #gh
    7p>agraph #ae7

               ,applic,n
    
  ,? bullet9 replaces & c.els ,9t]pret,n
,bullet9 #aji;,r1 dat$ ,m>* #be1 #aiha4
,curr5t revi.ns >e 9dicat$ 0v]tical
l9es4

                ,summ>y
    
  ,? bullet9 d1ls )! provi.ns (! ,act
applica# 6a3ru$ exp5ses t1 af a       #d
             ,,it-#aji;,r#b          d#a
specifi$ p]iod ( "t1 rema9 unpd4 ,!
-;t>y 2l 4cusses ! rules = unpd exp5ses
>is+ \ ( non->m's l5g? transac;ns &!
special rules = unpd employee remun],n &
o!r am.ts4 ,! tax 3sequ;es 6bo? ! debtor
&! cr$itor = s* unpd exp5ses &!
,de"p;t's posi;n 3c]n+ o!r pro#ms relat$
6^! provi.ns >e al 4cuss$4

          ,4cus.n & ,9t]pret,n
    
     ,unpd ,am.ts 7,o!r ,?an ,unpd
       ,employee ,remun],n & ,o!r
        ,am.ts7 7p>agraphs #a-e7
    
#a4 ,except z not$ 9 #c 2l1 ! provi.ns (
  subsec;n #gh7#a7 apply 6a deducti#
  \tlay or exp5se [+ 0a taxpay] if
  7a7 ! am.t is unpd at ! 5d (! second
    tax,n ye> foll[+ ! tax,n ye> 9 : !
    \tlay or exp5se 0 9curr$1 &
  7b7 ! taxpay] &! p]son 6:om ! am.t is
    [+ 7 n d1l+ at >m's l5g?1 bo? at !
                                      #e
             ,,it-#aji;,r#b          e#a
    "t ! exp5se 0 9curr$ & at ! 5d (!
    second
--------------------------------------#b
    tax,n ye> foll[+ ! tax,n ye> 9 : !
    exp5se 0 9curr$4
  
  ,9 s* cases1 ! am.t [+ is 9clud$ 9 !
  taxpay]'s 9come =! ?ird tax,n ye>
  foll[+ ! tax,n ye> 9 : ! \tlay or
  exp5se 0 9curr$4 ,? is s ev5 if ! am.t
  is pd 9 t ?ird tax,n ye>1 or 9 a lat]
  "o1 un.s an agree;t is fil$ "u
  p>agraph #gh7#a77b71 z 4cuss$ 9 #f 2l4
#b4 ,an excep;n 6! abv o3urs ": s* an
  \tlay or exp5se is [+ 0a corpor,n t is
  w.d up 2f ! 5d (! second tax,n ye>
  foll[+ ! tax,n ye> 9 : ! exp5se 0
  9curr$4 ,9 ? case subsec;n #gh7#b7
  applies &! am.t [+ is 9clud$ 9 !
  corpor,n's 9come 9 ! ye> x is w.d up4
#c4 ,=! purposes ( subsec;n #gh7#a7 &
  7#b7 a ..deducti# \tlay or .exp5se
  does n 9clude an \tlay or exp5se
                                      #f
             ,,it-#aji;,r#b          a#b
  7a7 = sal>y1 wages or o!r remun],n
    7see #aa 2l71
  7b7 =a sup]annu,n or p5.n b5efit1 or a
    retir+ all[.e 7see #ad 2l71
  7c7 = 9v5tory1 eligi# capital prop]ty1
    or capital prop]ty1 9clud+ deprecia#
    prop]ty1 or
  7d7 qualify+ z a ,canadian or =eign
    explor,n & develop;t exp5se "u
    subsec;n #ff7#ae71 a ,canadian
    explor,n exp5se "u subsec;n
    #ff.a7#f71 a ,canadian develop;t
    exp5se "u subsec;n #ff.b7#e71 or a
    ,canadian oil & gas prop]ty exp5se
    "u subsec;n #ff.d7#e74
#d4 ,unpd 9t]e/ is ord9>ily subject 6!
  rules 4cuss$ abv un.s a taxpay] elects
  6capitalize ! 9t]e/ "u sec;n #ba4 ,":
  a taxpay] s elects1 ! provi.ns ( sec;n
  #gh d n apply4 ,al1 if an am.t is unpd
  at ! 5d (a tax,n ye> & is n deducti# 9
  t ye> 0virtue ( subsec;n #ah7#i71
  sec;n #gh does n apply4
                                      #g
             ,,it-#aji;,r#b          b#b
#e4 ,if an unpd am.t is 9clud$ 9 a
  taxpay]'s 9come "u p>agraph
  #gh7#a77a71 "! is no provi.n 9 ! ,act
  : all[s ! taxpay] 6claim a deduc;n :5
  ! am.t is actu,y pd4

           ,fil+ an ,agree;t
            7p>agraphs #f-i7
    
#f4 ,": a debtor &a cr$itor file an
  agree;t 9 prescrib$ =m1 ! unpd am.t 9
  "q is deem$ 6h be5 pd 0! debtor &
  loan$ back 0! cr$itor1 ) all ! tax
  3sequ;es t fl[ "!from4 ,= example1 if
  a cr$itor has claim$ a res]ve "u
  p>agraph #bj7#a77l7 or 7n71 ! deem$
  pay;t 4qualifies any subsequ5t claim
  =a res]ve = t am.t4 ,al1 if a cr$itor
  has tr1t$ an unpd am.t z a bad debt &
  has claim$ a deduc;n "u p>agraph
  #bj7#a77p71 ! deem$ pay;t results 9 an
  9come 9clu.n "u p>agraph #ab7#a77i74
#g4 ,an agree;t 9 prescrib$ =m may 2
  fil$ "u p>agraph #gh7#a77b7         #h
             ,,it-#aji;,r#b          c#b
  provid$ ! nec reassess;ts1 ( bo? !
  debtor & cr$itor1 c 2 made )9 ! p]iod
  ref]r$ 6in subsec;n #aeb7#d74 ,if !
  agree;t is fil$ af ! "t p]iod specifi$
  9 p>agraph #gh7#a77b71 ! agree;t is /
  valid4 ,h["e1 9 ? case1 subsec;n
  #gh7#c7 requires ! debtor 69clude #be
  p] c5t (! am.t [+ 6! cr$itor 9 9come
  =! ?ird tax,n ye> foll[+ ! tax,n ye> 9
  : ! \tlay or exp5se 0 9curr$4
#h4 ,sec;n #gh may apply 6an \tlay or
  exp5se 9curr$ 0a "pn]%ip4 ,9 s* cases
  ! ,de"p;t w a3ept an agree;t fil$ on
  2half (! "pn]%ip only if
  7a7 ! agree;t is fil$ on or 2f ! f/ "d
    : is ! e>lie/ (! "ds on : a return
    is requir$ 0sec;n #aej 6be fil$ 0"o
    (! "pn]s1 .&
  7b7 ! return = t "pn] is =! tax,n ye>
    t 9cludes ! la/ "d (! ?ird tax,n ye>
    (! "pn]%ip foll[+ ! tax,n ye> 9 : !
    \tlay or exp5se 0 9curr$4
  
                                      #i
             ,,it-#aji;,r#b          d#b
#i4 ,if an agree;t 2t a debtor & cr$itor
  is fil$ "u sec;n #gh1 x _c 2 )drawn or
  resc9d$4

      ,unpd ,employee ,remun],n &
     ,o!r ,am.ts 7p>agraphs #aj-ad7
    
#aj4 ,subsec;n #gh7#d7 provides specific
  rules = an exp5se t is a sal>y1 wage
  or o!r remun],n f an (fice or
  employ;t4 ,if s* an exp5se is n pd )9
  #ahj "ds (! 5d (! tax,n ye> 9 : x 0
  9curr$1 subsec;n #gh7#d7 applies &!
  am.t [+ is deem$ n 6h be5 an exp5se
  9curr$ 9 ! ye> & is n deducti#4 ,h["e1
  if ! am.t [+ is actu,y pd af t "t1 x
  is deducti# 9 ! tax,n ye> x is pd z !
  am.t is deem$ 6be an exp5se 9curr$ 9 t
  ye>4 ,9 apply+ ^! rules1 ! ,de"p;t
  3sid]s a pay;t made on ! #ahj "d 6h
  be5 made )9 ! "t limit & subsec;n
  #gh7#d7 does n apply4 ,al1 ? subsec;n
  applies 6bo? >m's l5g? & non->m's l5g?
  transac;ns4                        #aj
             ,,it-#aji;,r#b          e#b
#aa4 ,=! purposes ( subsec;n #gh7#d7
  ..sal>y1 wages or o!r .remun],n ref]s
  6an am.t o!r ?an
  7a7 a r1sona# vac,n or holi"d pay1 or
  7b7 a def]r$ am.t paya# "u a .sal>y
    .def]ral .>range;t z def9$ 9
    subsec;n #bdh7#a7
  
  t1 if rcvd1 wd 2 9clud$ 9 ! recipi5t's
  9come "u ,subdivi.n a ( ,divi.n ;,b (
  ,"p #a (! ,act4
#ab4 ,subsec;n #gh7#e7 provides t if bo?
  subsec;ns #gh7#a7 & #gh7#d7 apply 6!
  same transac;n1 s* z ": an unpd sal>y
  is paya# 6an employee :o does n d1l at
  >m's l5g? )! employ]1 !n ! rules 9
  subsec;n #gh7#d7 w apply4
--------------------------------------#c
#ac4 ,! -;ts 9 #aj1 #aa & #ab abv 3c]n+
  sal>y1 wages or o!r remun],n apply
  6tax,n ye>s -m5c+ af ,febru>y #be1
  #aihf4 ,prior tax,n ye>s 7 gov]n$
  0rules simil> 6^? = o!r unpd am.ts "u
  sec;n #gh4 ,= example1 sal>ies &   #aa
             ,,it-#aji;,r#b          a#c
  wages t 7 unpd at ! 5d (a tax,n ye> 7
  requir$ 6be pd 0! 5d (! foll[+ tax,n
  ye>2 o!rwise1 ! am.t [+ 0 9clud$ 9 !
  cr$itor's 9come 9 ! second tax,n ye>
  foll[+ t 9 : ! exp5se 0 9curr$4
  ,6avoid ? result a provi.n exi/$ =
  fil+ an agree;t 9 a mann] simil> 6t =
  o!r unpd am.ts z 4cuss$ abv "u 8,fil+
  an ,agree;t40
#ad4 ,! rules = sal>ies1 wages or o!r
  remun],n 9 subsec;n #gh7#d7 h be5
  ext5d$ 6c]ta9 o!r am.ts4 ,^! rules
  apply al 6am.ts 9curr$ af ,july #aiij
  t >e 9 respect (a sup]annu,n or p5.n
  b5efit or a retir+ all[.e if ! exp5se
  is n pd )9 #ahj "ds (! 5d (! tax,n ye>
  9 : x 0 9curr$4 ,exp5ses = s* am.ts
  9curr$ 2f ? date >e n subject 6^!
  rules4 ,h["e1 ! g5]al provi.ns (
  #gh7#a7 may apply if ! exp5se >ose f a
  non->m's l5g? transac;n4


                                     #ab
       ,pro#ms ,9volv+ ,sec;n #gh    b#c
             7p>agraph #ae7
    
#ae4 ,c]ta9 pro#ms 9volv+ sec;n #gh &!
  mann] 9 : !y >e d1lt ) 0! ,de"p;t >e
  4cuss$ 2l4
  7a7 ,debtor & ,cr$itor on ! ,a3rual
    ,basis
    ,g5],y1 ": an unpd am.t exi/s 2t a
    debtor & cr$itor :o >e n d1l+ at
    >m's l5g? & bo? taxpay]s a3.t =
    9come on ! a3rual basis1 subsec;n
    #gh7#a7 w n 2 9vok$4 ,an excep;n
    o3urs ": ! unpd am.t 9 "q appe>s 6be
    "p (a tax avoid.e s*eme :1 =
    example1 may 9volve transac;ns s* z
    --claim+ a res]ve "u p>agraph
      #bj7#a77l7 or 7n71 or a deduc;n "u
      p>agraph #bj7#a77p71 or
    --def]r+ tax "u ,"p ,,xiii (! ,act
      ": ! cr$itor is a non-resid5t4
    
    ,al1 subsec;n #gh7#a7 w n 2 appli$
    6! debtor taxpay] if an unpd am.t is
    report$ z 9come 9 ! ye> 0a       #ac
             ,,it-#aji;,r#b          c#c
    cr$itor :o is on ! ca% basis (
    report+ 9come4
  7b7 ,pay;t 0,promissory ,note
    ,=! purposes ( sec;n #gh1 an ord9>y
    promissory note is reg>d$ z a
    promise 6pay a debt at a lat] date1
    & n z pay;t (! debt on ! date on : !
    note 0 issu$4 ,? is s un.s ! agree;t
    2t ! "pies cle>ly 9dicates t ! note
    0 a3ept$ z absolute pay;t4 7;i7
  
7;i7 ,modifi$ 0,correc;n ,%eet ,,cs #bd
  dat$ ,april #bj1 #bjja4

  7c7 ,=give;s ( ,debt
    ,z 4cuss$ 9 ! curr5t v].n (
    ,,it-#bic1 ,debtor's ,ga9 on
    ,settle;t ( ,debt1 if an am.t is
    9clud$ 9 9come "u sec;n #gh1 ! rules
    9 sec;n #hj w n 2 appli$ 6t am.t4
  7d7 ,non-,resid5t ,)hold+ ,tax
    ,require;ts
    ,"! may 2 circum/.es ": an am.t [+
    0a ,canadian taxpay] is due 6a   #ad
             ,,it-#aji;,r#b          d#c
    non-resid5t ) :om ! taxpay] does n
    d1l at >m's l5g?1 & if pd1 ! am.t [+
    wd 2 subject 6non-resid5t )hold+
    tax4 ,9 ^! circum/.es1 if an agree;t
    pursuant 6p>agraph #gh7#a77b7 is
    fil$ = s* an am.t1 ! am.t is subject
    6non-resid5t )hold+ tax at ! "t x is
    deem$ 6h be5 pd 0! ,canadian
    taxpay]4 ,": ! agree;t is fil$ )9 !
    prescrib$ "t limits1 x is n !
    ,de"p;t's practice 6levy a p5alty or
    9t]e/ 9 respect (! )hold+ tax
    require;ts provid$ t ! am.t ( tax is
    remitt$ on or 2f ! fifte5? "d (!
    mon? foll[+ ! mon? 9 : ! agree;t is
    fil$4 ,z subp>agraph #gh7#a77b77;ii7
    deems ! am.t [+ 6be a loan f ! non-
    resid5t 6! ,canadian taxpay]1 any
    subsequ5t pay;ts made 0! ,canadian
    taxpay] on a3.t ( t 9debt$;s >e
    reg>d$ z loan repay;ts &1 "!=e1 >e n
    subject 6non-resid5t )hold+ tax4
  
                                     #ae
             ,,it-#aji;,r#b          e#c
    ,al1 ! provi.ns ( sec;n #gh apply 6a
    deducti# am.t [+ 6a non-resid5t :o
    does n d1l at >m's l5g? )! ,canadian
    taxpay] ev5 ?\< ! am.t1 s* z a
    copy"r royalty1 is n subject 6non-
    resid5t )hold+ tax4
  7e7 ,unpd ,am.ts vs4 ,res]ve
    ,p>agraph #ah7#a77e7 provides t a
    deduc;n is n all[$ = an am.t z1 or
    on a3.t (1 a res]ve1 a s9k+ fund1 or
    a 3t+5t liabil;y un.s x is expressly
    p]mitt$ 0! ,act4 ,9 ord] = an exp5se
    t rema9s unpd at ! 5d (a tax,n ye>
    6be deducti# = tax purposes1 x m/
    3/itute a g5u9e liabil;y (! taxpay]4
    ,if s* an unpd am.t does n 3/itute a
    g5u9e liabil;y1 no deduc;n is all[$4
    ,=a g5u9e liabil;y 6exi/1 "! m/ 2 an
    5=cea# claim 0! cr$itor )a r1sona#
    expect,n t ! debt w 9 fact 2 pd 0!
    debtor4 ,"!=e1 if p>agraph
    #ah7#a77e7 applies 6a "picul> unpd
    am.t1 sec;n #gh does n apply4
                                     #af
             ,,it-#aji;,r#b          f#c
  7f7 ,id5tific,n ( ,pay;ts ) ,am.ts
    ,unpd
    ,": a "picul> exp5se rema9s unpd &
    is made up ( s"eal unpd am.ts (!
    same nature1 any pay;ts rcvd = ^!
    unpd am.ts >e 3sid]$ 6apply f/ 6!
    olde/ am.t \t/&+ un.s ! facts cle>ly
    9dicate o!rwise4
--------------------------------------#d
  7g7 ,w9d+-,up
    ,": a deducti# \tlay or exp5se is [+
    0a subsidi>y 6a p>5t1 or 0a p>5t 6a
    subsidi>y1 at ! "t a corpor,n is w.d
    up pursuant 6subsec;n #hh7#a71
    subsec;ns #gh7#a7 & 7#b7 w only 2
    appli$ if ! debtor taxpay] is on !
    a3rual basis ( report+ 9come &!
    cr$itor is on ! ca% basis4 ,al1 9 s*
    cases1 ^! subsec;ns w n 2 appli$ if
    ! ca%-basis taxpay] reports !
    receiva# z 9come 0! 5d ( xs tax,n
    ye> 9 : ! w9d+-up o3urs4 ,at ! "t (
    w9d+-up1 if a deducti# \tlay or
    exp5se is [+ 0! subsidi>y 6a     #ag
             ,,it-#aji;,r#b          a#d
    p]son o!r ?an ! p>5t1 sec;n #gh w n
    2 appli$ provid$ ! ,de"p;t is
    assur$1 6xs satisfac;n1 t ! unpd
    am.ts w 2 pd 0! p>5t 2f ! dates on :
    subsec;ns #gh7#a7 or 7#d7 wd o!rwise
    h 2come op]ative _h ! subsidi>y n
    be5 w.d up4
  7h7 ,sale ( ,prop]ty
    ,": a taxpay] sells a prop]ty at a
    "t :5 a deducti# \tlay or exp5se
    rema9s unpd1 &! pur*as] assumes !
    oblig,n 6pay ! unpd am.t z full or
    "pial 3sid],n =! pur*ase1 sec;n #gh
    w n 2 appli$ 6! taxpay] if ! pur*as]
    pays ! unpd am.t 2f ! date on :
    subsec;n #gh7#a7 2comes op]ative4







                                     #ah