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This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: [TaxInterpretations translation] Are benefits received under the Québec Parental Insurance Plan (QPIP) included in earned income within the meaning of subsection 63(3)?
Position: No
Reasons: By virtue of the legislative proposals of July 16, 2010, it is anticipated that QPIP benefits will be included in the computation of income by virtue of proposed subparagraph 56(1)(a)(vii). Consequently, these benefits are not covered by any of the paragraphs in the definition of income earned in subsection 63(3).
October 15, 2012
|
Jonquière Tax Services Office
Attention: Ghislaine Larouche
|
Headquarters
Financial Industries and Trusts Section
Catherine Ayotte
Notary, M. Fisc
2012-045216 |
Childcare expenses
This is in response to your June 11, 2012 e-mail regarding the concept of earned income respecting the child care expense deduction in section 63 of the Income Tax Act (the "Act").
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
In particular, you wish to know whether the benefits received under the Quebec Parental Insurance Plan (QPIP) under the Act respecting Parental Insurance, R.S.Q., c. A-29.011, must be taken into account for the purposes of the definition of "earned income" in subsection 63(3). You are primarily concerned about the possibility that QPIP benefits are amounts included in computing the taxpayer's income by virtue of paragraph 56(1)(r). Consequently, the taxpayer’s benefits would be included in earned income under paragraph (b) of that definition in subsection 63(3).
Different provisions of section 63 limit the deduction a taxpayer may claim for child care expenses incurred in a year. Among these, paragraph 63(1)(e) provides that the deduction for child care expenses is limited to two-thirds of the taxpayer's earned income for the year.
The concept of earned income is provided for in subsection 63(3) as being the total of the following amounts:
(a) all salaries, wages and other remuneration, including gratuities, received by the taxpayer in respect of in the course of, or because of, offices and employments,
(b) all amounts that are included, or that would, but for paragraph 81(1)(a) or subsection 81(4), be included, because of section 6 or 7 or paragraph 56(1)(n), (n.1), (o) or (r), in computing the taxpayer’s income,
(c) all the taxpayer’s incomes or the amounts that would, but for paragraph 81(1)(a), be the taxpayer’s incomes from all businesses carried on either alone or as a partner actively engaged in the business, and
(d) all amounts received by the taxpayer as, on account of, in lieu of payment of or in satisfaction of, a disability pension under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act
In our view, the QPIP tax benefits are not covered by any of the paragraphs in the definition of earned income in subsection 63(3). Rather, it is provided that this type of benefit is included in computing a taxpayer's income under paragraph 56(1)(a). Indeed, the legislative proposals announced on July 16, 2010 proposed the addition of subparagraph 56(1)(a)(vii), which provides that a benefit paid under the Act respecting Parental Insurance, R.S.Q., c. A-29.011 will be included in computing a taxpayer's income for a taxation year (footnote 1). This amendment to the Act is intended to apply to the 2006 and subsequent taxation years.
This addition is consistent with what the Department of Finance originally announced in a News Release (footnote 2) on July 19, 2005. The Department of Finance announced its intention to recommend amendments to the Act such that the QPIP benefits would receive a tax treatment similar to that of parental benefits paid by virtue of Part I of the Employment Insurance Act, which must be included in the computation of a taxpayer's income for a particular taxation year by virtue of subparagraph 56(1)(a)(iv). That type of benefit is also not included in the computation of earned income within the meaning of subsection 63(3).
Access to Information
For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, it is possible to provide the version from the electronic library. The client may also request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Ms. Celine Charbonneau at (613) 952-1361. In such cases, a copy will be sent to you for delivery to the taxpayer.
Best regards,
Louise J. Roy, CPA, CGA
Manager
for the Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 In Budget 2012, the Department of Finance confirmed the government's intention to move forward on previously announced tax measures, including those of July 16, 2010. See Annex 4: Tax Measures: Supplementary Information, Previously announced measures, in the March 29, 2012 Federal Budget.
2 News Releases 2005, 2005-050 Department of Finance, July 19, 2005
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