Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
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: Does paragraph 18(1)(p) of the Income Tax permit a personal services business to deduct payroll cost associated with the salary paid to the incorporated employee
Position: Yes
Reasons: Expense incurred is directly related to the incorporated employee. Consistent with position in E2000-0005305 and E9929875
XXXXXXXXXX 2001-008674
Cornelis Rystenbil, CGA
September 11, 2001
Dear XXXXXXXXXX:
Re: Personal Services Business
This is in reply to your letter of May 24, 2001 in which you ask for our view on whether paragraph 18(1)(p) of the Income Tax Act (the "Act") permits a corporation carrying on a personal services business, as defined in subsection 125(7) of the Act, to deduct the employer's portion of source deductions related to the salary paid by the corporation to the incorporated employee (within the meaning assigned by the definition of "personal services business" in subsection 125(7) of the Act).
In our view, the employer's portion of source deductions incurred by a corporation carrying on a personal services business that are directly related to an incorporated employee are deductible by such a corporation provided that these amounts would be deductible in computing the corporation's income, if its income were from a business other than a personal services business.
In connection with a personal services business, we note that employment is not insurable and is not subject to Employment Insurance premiums when a corporation employs a person who controls more than 40% of the corporation's voting shares.
We trust that these comments will be of assistance.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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