December 2013

TaxMatters@EY

End the year with tax savingsJanna Krieger, Toronto

Have you ever looked at your tax bill in April and wondered if there’s anything you can do to reduce it before you file your return?

At that point, the answer is probably not much. But don’t worry — it’s that time of year again for our annual reminder of tax tips to consider now, while you still have time to save money on your 2013 tax bill.

These tips may look familiar, but it’s important to think about them every year, because what makes sense for you may change from one year to the next as your personal circumstances change.

December is a hectic month for many people, but if you add some of these considerations to your year-end to-do list, they could help you save tax dollars for 2013 and years to come.

Contribute to a tax-free savings account: Make your $5,500 tax-free savings account (TFSA) contribution for 2013. If you haven’t contributed before, you can contribute up to $25,500 before the end of the year. You won’t get a deduction for the contribution, but you will benefit from tax-free earnings on invested funds. Also, in order to maximize tax-free earnings, consider making your 2014 $5,500 contribution in January. Remember that you can also fund your spouse’s/partner’s contributions without attracting the attribution rules.

If you don’t have extra cash to contribute, consider making a contribution in-kind, to start sheltering investment income that you are already earning on your portfolio. But be sure that the investments are qualified (and not prohibited) investments for a TFSA, and be aware that any accrued gains on property transferred to a TFSA will be realized and taxable at the time of transfer, while accrued losses will be denied.

Building a better working world means understanding your tax situation and how the ever-changing global tax landscape affects you. TaxMatters@EY is a monthly Canadian bulletin that summarizes recent tax news, case developments, publications and more. For more information, please contact your EY advisor.

In this issue

Money received from former employer considered taxable benefit, not a gift

9

End the year with tax savings1Addressing business- traveler risk7

Publications and articles11

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If you’ve withdrawn funds from your TFSA in 2013, keep in mind that the contribution room created by the withdrawal is not available until 2014. Also, if you think you will need funds early in 2014, consider a withdrawal now in 2013 so that you’ll be able to recontribute the funds as soon as possible in 2014, rather than having to wait until 2015 to recontribute a 2014 withdrawal.

Contribute to education: Remember to make registered education savings plan (RESP) contributions for your child or grandchild before the end of the year. With a contribution of $2,500 per child under age 18, the federal government will contribute a grant (CESG) of $500. If you have prior non-contributory years, the annual grant can be as much as $1,000 (in respect of a $5,000 contribution). If you have a child who is 15 this year but you have never contributed to an RESP on his or her behalf, 31 December is your last chance to make a contribution and earn a CESG for that child. There is no annual RESP contribution limit; however, there is a lifetime contribution limit of $50,000 per child.

Contribute to an RRSP: The deadline for making deductible 2013 registered retirement savings plan (RRSP) contributions is 3 March 2014 (since 1 March falls on a Saturday in 2014). The earlier you contribute, the more time your investments have to grow, so consider making your 2014 contribution in January 2014 to maximize the tax-deferred growth. If your income is low in 2013 but you expect to be in a higher bracket in 2014 or beyond, consider contributing to your RRSP as early as possible but holding off on taking the deduction until a future year when you are in a higher tax bracket.

If you are 71 years old at the end of the year, you must make your final RRSP contribution no later than 31 December (not 60 days after the end of the year), and you must select an RRSP maturity option by the end of the year. If your spouse is under 71, consider making deductible spousal RRSP contributions if you have earned income or unused contribution room.

Pay tax-deductible or tax-creditable expenses in 2013: A variety of expenses can only be claimed as deductions in a tax return if the amounts are paid by the end of the calendar year. Some of these expenses include interest, investment counsel/management fees, professional dues, spousal support and child-care costs. In addition, expenditures that give rise to tax credits, such as charitable donations, political contributions, medical expenses, children’s fitness program costs, children’s arts program costs, tuition fees and transit pass costs, must be paid in the year in order to be creditable.

If these amounts would otherwise be paid early in 2014, consider paying them by the end of this year to get the benefit of the tax deduction or credit in your 2013 return.

And remember to keep receipts! Although you aren’t required to include most receipts when filing, the Canada Revenue Agency (CRA) randomly requests receipts as part of its post-assessment review.

Reduce or eliminate non-deductible interest: Interest on funds borrowed for personal purposes is not deductible. Where possible, consider using available cash to repay personal debt before repaying loans for investment or business purposes on which interest may be deductible.

Year-end tax to-do listBefore 31 December 2013:

• Make 2013 TFSA contribution

• Make 2013 RESP contribution

• Final RRSP contribution deadline for taxpayers who are 71 years old

• Pay tax-deductible or tax-creditable expenses

• Advise employer in writing if eligible for reduced automobile benefit

• Request CRA authorization to decrease tax withheld from salary in 2014

• Review your investment portfolio for potential dispositions to realize gains or losses in 2013

• Make capital acquisitions for business

• Evaluate owner-manager remuneration strategy

• Consider allowable income-splitting strategies

Early 2014:

• Make 2013 (if not already made) and 2014 RRSP contributions

• Make 2014 TFSA contribution

• Make 2014 RESP contribution

• Interest on income splitting loans must be paid by 30 January

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Reduce automobile taxable benefit: If you’re an employee who uses an employer-provided car primarily for business, you may be eligible for a reduced standby charge (in respect of the availability of the car) and a lower alternate operating benefit, computed as one-half of the standby charge. Update your travel log now to determine if you’re within the thresholds for reduced benefits, and advise your employer in writing before year end in order to have the alternate operating benefit apply.

Request reduced source deductions: If you regularly receive tax refunds because of deductible RRSP contributions, child-care costs or spousal support payments, consider requesting CRA authorization to allow your employer to reduce the tax withheld from your salary (Form T1213). Although it won’t help for 2013 taxes, in 2014 you’ll receive the tax benefit of those deductions all year instead of waiting until after your 2014 tax return is filed.

Income-splitting loans: The prescribed interest rate applicable to the exemption from income attribution on intra-family loans increased to 2% for loans created in the final quarter of 2013, the first increase from the 1% rate that has been in effect since 2009. The prescribed interest rate returns to 1% for loans created in the first quarter of 2014.

If you have outstanding income splitting loans, remember that you must pay interest by 30 January 2014 to avoid income attribution.

Review your investment portfolio: Year end is a good time for an investment portfolio review. While taxes should not drive your investment decisions, it may make sense to sell loss securities to reduce capital gains realized earlier in the year. If the losses realized exceed gains realized earlier in the year, they can be carried back and claimed against net gains in the preceding three years and you should receive the related tax refund.

• The CRA actively reviews and challenges tax shelter gifting arrangements, which are most commonly schemes where a taxpayer receives a charitable donation receipt with a higher value than the actual donation.

• The CRA has indicated that it audits all of these tax shelter arrangements, and to date has not found any that it believes comply with Canadian tax laws. It has generally succeeded before the Tax Court in denying the benefits of tax shelter gifting arrangements.

• Moreover, the CRA will put on hold the assessment of (or payment of refunds on) any personal returns with claims from gifting tax shelter schemes until the tax shelter is audited, which may take up to two years.

• Starting in 2013, if you object to an assessment of tax, interest or penalties because of a tax shelter gifting claim, the CRA will be permitted to collect 50% of the disputed amount.

Tax shelter gifting arrangements: You should only consider an investment in a tax shelter after obtaining professional advice.

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• Superficial loss — Keep in mind, if you, your spouse/partner, a corporation that either of you controls, your RRSP or your TFSA acquires the same security that you sell at a loss within 30 days before or after the sale and still owns that security 30 days after the sale, the loss will be denied. Moreover, if an RRSP or TFSA acquires the replacement security, any tax benefit from the loss is effectively eliminated. However, if your spouse/partner owns investments that have decreased in value but they cannot use the capital loss, consider taking advantage of the superficial loss rules by purchasing the investments from your spouse/partner at fair market value and electing out of the automatic rollover provisions. On the subsequent sale to an arm’s-length party, you can claim the capital loss.

• Using capital losses — If you have capital loss carryforwards from prior years, you might consider cashing in on some of the winners in your portfolio. By applying unused capital loss carryforwards against 2013 realized gains, the tax cost associated with the gains can be reduced or eliminated.

Or, if you have capital loss carryforwards from prior years, consider transferring qualified securities with accrued gains to your TFSA (up to your contribution limit). The resulting capital gain will be sheltered by available capital losses, and future earnings on these securities can accumulate tax free.

For further savings if you have capital loss carryforwards from prior years, consider transferring qualified securities with accrued gains to your RRSP. The resulting capital gain will be sheltered by the available capital losses, and you’ll get an RRSP deduction for the fair market value of the securities (up to your contribution limit). Remember, 100% of any future gains will be taxable when the funds are withdrawn from the RRSP.

• Settlement date — For security sales, keep in mind that the trade must settle in 2013 to be considered a 2013 disposition. For Canadian exchanges, the final trade date for 2013 settlement is 24 December, and for US exchanges it is 26 December.

• Purchasing investments in December – If you’re considering buying bonds or long-term GICs this month (perhaps from the proceeds of security sales), keep in mind that even if the investment pays no interest in 2014, tax will be payable on the interest that accrues to the first-year anniversary date (December 2014) with your 2014 tax return. By delaying the purchase to January 2014, that tax can be deferred until 2016 when you file your 2015 tax return.

In the case of mutual funds that regularly make distributions near year end, the distribution amount is effectively included in the purchase price and will be taxable in your 2013 return. It might be better to wait until after the distribution to purchase those funds; the cost may be lower and tax would be deferred.

• Donations of securities – If you hold securities whose value has risen and plan to make charitable donations, consider gifting the securities rather than cash to a registered charity. Capital gains realized on a donation of most publicly listed securities to a registered charity are not included in income, and the donation tax credit will reduce your taxes in the same manner as a donation of cash equal to the securities’ full value.

• Foreign reporting — If, at any time in the year, you held certain specified foreign property with a total cost of more than $100,000, you are required to file an information return (Form T1135) with your personal tax return for the year, reporting details of those investments.

This requirement is not new. However, as of 2013, the information return requires more detailed information for each property than in previous years (including the applicable country code, maximum and year-end cost amounts of each property, and income, loss or capital gain realized from each property during the year).

An exception from this detailed reporting is provided where a T3 or T5 is received from a Canadian issuer in respect of a particular foreign property. If several investments are held in one account, only the specific investments for which a T3 or T5 was issued would meet this reporting exclusion, so you will still have to review your portfolio for details of each foreign property to ensure the exemption applies. In fact, an investment may be excluded under this exemption in one year and

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not in another year, depending on whether it earned income for which a T3 or T5 was issued. Even if your property meets the reporting exemption, you are still required to file Form T1135 claiming the exemption.

Start gathering this information now so that you will be able to file accurately and on time, because in addition to assessing penalties for late-filing the form, beginning in 2013 the CRA has also extended the period within which it can reassess your return by an additional three years if you fail to report income from a foreign property and Form T1135 was not filed on time or a property was omitted from or improperly identified on Form T1135 for the year.

Make capital acquisitions for business: Self-employed individuals and unincorporated business owners expecting to make capital purchases for their business (such as furniture or equipment) in the near future should consider buying before year end to get a depreciation deduction for 2013.

For a 2013 deduction (of a half-year’s depreciation) to be available, the asset must be “available for use” — that is, installed and ready to be used for its intended purpose — by 31 December 2013.

Revisit your 2013 instalment requirement: You may have received a notice from the CRA advising you of your final 2013 instalment payment due on 15 December 2013. However, if you expect your 2013 final tax liability to be significantly lower than your 2012 liability (for example, due to lower income from a particular source, losses realized in 2013 or additional deductions available in 2013) you may have already paid enough in instalments.

You are not required to follow the CRA’s suggested schedule, and are entitled to base your instalments on your expected 2013 liability. However, if you

underestimate your 2013 balance and your instalments end up being insufficient or the first two payments were low, you will be faced with interest and possibly a penalty. You will not be charged interest if you pay what the CRA advises, even if your tax liability ends up being higher than your instalments paid according to the CRA’s schedule.

For more information on these and other tax-planning and tax-saving ideas, please call your EY advisor.

And for more tips and strategies that can help you throughout the year, download our helpful annual guide, Managing Your Personal Taxes: a Canadian Perspective.

Join us for our year-end tax planning webcast

Based on our annual publication Managing Your Personal Taxes 2013-14: a Canadian Perspective, this webcast features year-end tax planning tips to consider as 2013 draws to a close.

Canadian tax planning tips are presented by David Steinberg, co-leader of EY’s private mid-market practice in Toronto, and include a discussion on personal tax, business tax, income splitting and estate planning.

US and cross-border tax planning tips are presented by Leah Shinh, senior manager in EY’s Human Capital, Global Mobility tax practice, and include a discussion on investing offshore, pension contributions for international workers, US tax for Canadian residents, and leaving and entering Canada.

No matter how much you earn or what your personal circumstances, you’ll find useful information that will help you save time, save stress and — perhaps most important — save money.

To access the webcast, please visit http://eycast.eycan.com/OnDemand/20131202YearEndTaxPlanningTips/main.htm.

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Canadian-controlled private corporation year-end remuneration planning: Corporate business owners should make decisions about final remuneration from the company before year end. Changing federal and provincial personal and corporate tax rates have made old rules of thumb in owner-manager remuneration obsolete. These decisions should be re-evaluated each year based on the specific needs of the business owner, particularly given the tax deferral available if funds are left in a corporation.

• In general, if the owner-manager does not need the money, it should be left in the corporation to grow, subject to tax at corporate tax rates, which are less than personal tax rates.

• Keep in mind that leaving earnings in the corporation may affect a Canadian-controlled private corporation’s entitlement to refundable scientific research and experimental development (SR&ED) investment tax credits, as well as its status as a qualified small business corporation for the purpose of the shareholder’s capital gains exemption.

• If the owner-manager needs the money, the decision of how and when to take it out will be affected by several factors. For example, the timing of remuneration would be influenced by trends in provincial corporate and personal tax rates. In provinces where personal tax rates are increasing, there may be a benefit to realizing personal income in 2013 instead of 2014.

• If there is a plan to pay salary, remember that bonuses can be accrued and be deductible by the company in 2013, but don’t have to be included in the business owner’s personal income until paid in 2014 (the bonus must be paid within 179 days after the company’s year end). This allows for a deferral of tax on salary.

In determining the preferred form of remuneration, there are several factors to consider:

• Business owners may want enough salary to create sufficient 2013 earned income to maximize their 2014 RRSP contribution. Whether this is an appropriate strategy depends on the cash needs of the owner-manager this year and in the near future, as well as the applicable corporate and personal tax rates in the province of residence. In order to contribute the maximum of $24,270 for 2014, business owners will need a 2013 salary of at least $134,833. Remember that dividends do not represent earned income for the purpose of creating RRSP contribution room. Earned income is also required for other personal tax deductions, such as child care and moving expenses.

• Consider paying a reasonable salary to a spouse or adult child who provides services to the business in order to split income.

• If the business owner needs the money, review any shareholder loan accounts to find any tax-paid balances that may be withdrawn from the company. And if you find a debit balance, remember that it must be repaid within one year after the end of the year in which the loan was made, or else it will be included in the business

owner’s income. Also, remember to include imputed interest (where applicable) in the business owner’s income while the loan is outstanding.

• Paying dividends may be a tax-efficient way of getting funds out of the company. Capital dividends are completely tax free, and eligible dividends are subject to a preferential tax rate. A review of the company’s capital dividend account would determine if capital dividends may be paid. A review of the company’s general rate income pool, to determine whether lower-taxed eligible dividends can be paid, could also enhance tax effectiveness.

• Taxable dividends that will generate a dividend refund in the corporation (1/3 of the dividend paid), particularly if they are eligible dividends (subject to a preferential tax rate), may generally be paid out with essentially no net tax cost, or even a positive cash flow result between the corporation and its owner(s). Given the scheduled increase in non-eligible dividend rates after 2013, if you were going to take a non-eligible dividend in 2014, consider taking it in 2013 instead, before the rates increase. •

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Short-term business travellers continue to be a key focus area for many tax authorities. These individuals may be employees who take occasional business trips to a variety of locations, employees who take regular business trips to a few locations or employees who go on an extended business trip to one single location. These employees are not on a formal assignment to a different work location and are not seconded to a host entity. The risks associated with these individuals continue to grow, and the attention paid by tax and immigration authorities to them has not lessened in the last two years.

Why the focus?While tax and immigration authorities continue to focus on this population, multinational companies are actually tending to increase their reliance on this population. Several factors are contributing to this trend: companies continue to face pressure to keep up with the pace of globalization, using a globally mobile workforce, but at the same time they need to manage and reduce costs. For these reasons, short-term business travellers are seen as a growing necessity in today’s business world.

What are the risks?There has been, and continues to be, a clear focus by tax authorities on collecting revenue through personal and corporate income taxes. Multinational companies now also know that the risks they face with regard to these short-term business travellers do not end there. Companies can face fees and penalties, or other negative consequences, even when an employee’s travel does not cause a personal or corporate tax liability.

Addressing business traveller risk Extract from Global Tax Policy and Controversy Briefing November 2013

Short-term business travellers

Regulatorycompliance

Businessreputation

risk

Unhappyemployees

Budgetaryrisk

Permanentestablishment

risk

Employmentlaw risk

Risk ofprosecution

Non-compliance with complex immigration, withholding tax, social security and other reporting requirements creates a potential for penalty assessment

Inherent risks of short-term business travel

Senior assignees in certain countries can create permanent establishment (PE) risks for employing entity

Non-tracked employees could pose risk of employment law exposure to the company

Failure to report income,withhold income taxes, pay taxes or adhere to immigration policies can result in criminal prosecution

of the company.Non-compliance with local legislation can result in failure to properly budget and allocate costs

Employees in a particular country can seriously harm an organization's reputation and may impact its ability to operate in that country

Employees do not want personal tax and immigration exposure

Inherent risks

These negative consequences are not limited to direct tax costs and can include:

Business reputation risk: The general public is more in tune and critical of companies that are perceived as not fulfilling tax obligations or not adhering to immigration laws. Negative press about a company alone has the ability to tarnish a brand. Some jurisdictions, however, have gone even further and created limits on an organization’s ability to do business if that company is not in compliance with local laws and obligations. This risk of business interruption continues to grow.

Employee dissatisfaction: When an employer does not address the tax and immigration requirements of their travelling employees, and employees face negative

consequences as a result, the employees may place blame on their employer and expect the employer to rectify the situation. This will take time from the focus of an employee and can result in reduced productivity and potentially even the loss of an employee.

Budgetary risk: When an employee’s business travel causes a company to incur unexpected tax or penalty costs, those costs will typically not have been properly accrued for. As a result, there will be a negative impact on financial results.

Risk of prosecution: Failure to report income, withhold income taxes, pay taxes or adhere to immigration policies can result in criminal prosecution for the individual and officers of the company.

8 TaxMatters@EY December 2013

Employment law risk: Employees working in different jurisdictions without the associated control and visibility from the corporate level could subject the employer to the employment law of that jurisdiction, without the employer being aware of it.

Are the risks real?The risks are very real. More and more often, authorities are taking action and companies are paying the price. Further, the risks extend to not just foreign travel, but to domestic travel as well. This is evidenced in the range of examples noted below.

• Canada: Numerous foreign companies are being audited with respect to foreign employees with short-term business trips to Canada.

• USA: US$20m assessed in under-withheld taxes, penalties and interest for domestic short-term business travellers.

• UK: A company pays more than £40m in back taxes and penalties for failure to accurately report home-paid income in the UK.

• UK: Of 407 immigration investigations in the UK, 72% resulted in prosecution and criminal sanctions, of which 46% included jail sentences of seven to 12 months.

• India: A European multinational was assessed €5m in penalties for failing to report full home-paid compensation for employees assigned to work in India. Indian authorities then opened a fuller three-year investigation.

• China: A manufacturer was the subject of a payroll audit in China, resulting in the requirement for payment of approximately US$25m in back taxes and US$8m in penalties.

• France: Social security authorities led a raid and criminal investigation on a multinational company, resulting in a US$8m assessment of back social security tax and penalties.

• Germany: An enquiry into a related matter uncovered an internal control breakdown requiring a multinational company to restate previously published financial statements by €100m to correctly report employer-paid tax expense.

• Japan: A global financial services company had its entire foreign retirement plan retroactively disqualified for Japanese tax purposes, requiring the payment of back taxes of US$8m and US$1m in penalties.

How are companies responding?Compliance with the law is a black and white issue and companies must address risk issues in a more proactive manner. Multinational companies are not only assessing the risk, but are increasingly quantifying that risk. Companies are reviewing their processes, ranging from how a business unit approves business travel to how employees book travel arrangements and what activities the employees are carrying out while in the host location. Companies are also reviewing their corporate structure, transfer pricing strategies and chargeback positions and assessing how all the different moving parts may together impact business traveller risk.

The effort to broadly assess these risks can be complicated by the fact that the assessment, and any action plan to address the risk, must be cross-functional in nature. Tax, Finance and Human Resources, and even the payroll and travel departments, must be involved, some of which may have been outsourced to different vendors and some of which may reside in different geographical locations altogether. No longer satisfied that the risk can be managed within long-established processes, many companies are either revisiting their processes or creating new ones designed to identify and manage the risks earlier in the lifecycle. •

EY Tracer technology for smartphones helps globetrotting workers manage tax surprisesEY has released a smartphone application that helps business travellers and their employers avoid global tax traps and immigration violations. This technology helps companies manage the increasing risks associated with employees crossing borders, the conflicts they create and, in extreme cases, keep executives out of jail.

The new app works in conjunction with EY’s existing Traveler Risk and Compliance (TRAC) service, which assists organizations in navigating the myriad personal and corporate tax and immigration rules for more than 100 countries.

Employees who download the app can use it to report their location to a central tracking system, allowing travel data to be analyzed by employers to avoid tax surprises and comply with immigration laws. The app tracks current location, home location and whether time spent abroad has been a work day, travel day or vacation day — no personal identifiable information is transmitted.

To learn more, see “EY Tracer’s dashboard reporting capabilities” in the November 2013 edition of Global tax policy and controversy briefing.

9 TaxMatters@EY December 2013

In this case, the taxpayer received three payments from his former employer, Mr. Robert, when the company was sold to a new owner. The taxpayer argued the amounts were gifts given to him by his former employer in a personal capacity, and were therefore non-taxable for the purposes of the Income Tax Act. The Tax Court of Canada, however, found the amounts were related to the taxpayer’s employment, and were therefore taxable benefits under paragraph 6(1)(a) of the Income Tax Act.

FactsThe taxpayer had been employed as the equipment manager for L. Robert Enterprises Ltd. (Robert Ltd.), which was controlled by Mr. Robert. In 2006, Robert Ltd. agreed to sell its business and assets to L. Robert Enterprises Corp. (Robert Corp.), a newly incorporated subsidiary of CEDA International Corporation (CEDA). After the sale, the taxpayer became employed by Robert Corp. as the equipment manager.

On 28 September 2006, the taxpayer and other former managers of Robert Ltd. received letters signed by Mr. Robert informing them that they would be receiving payments from Robert Ltd. The letters described the payments as bonuses. In December 2006, Mr. Robert directed Robert Ltd. to make the first payments. The payments to the taxpayer consisted of $47,000 on 8 December 2006, $47,000 on 8 January 2007 and $46,000 on 28 November 2007.

The taxpayer indicated that Mr. Robert intended the payments to be gifts, given to him in a personal

capacity and not as employee. The taxpayer had a friendly relationship with Mr. Robert and had frequently attended social events with him. Finally, the taxpayer was not employed by Robert Ltd. at the time the payments were made.

IssueThe issue before the Tax Court was whether the payments were benefits received in respect of, in the course of, or by virtue of an office or employment and therefore taxable as employment income under paragraph 6(1)(a) of the Income Tax Act.

Tax Court of Canada decisionUnder paragraph 6(1)(a), the value of any benefits received by a taxpayer in respect of, in the course of, or by virtue of the taxpayer’s employment is to be included in employment income. Paragraph 6(1)(a) is an all-embracing provision, capturing benefits of any kind that have some connection to the taxpayer’s employment.

The Tax Court of Canada explained that the phrase “in respect of” is probably the widest of any expression intended to convey some connection between two related subject matters, and the additional phrases “in the course of” and “by virtue of” required only the smallest connection to employment. While a benefit that is received in one’s personal capacity may fall outside the realm of paragraph 6(1)(a), the Court noted that this exception is very narrow and available only where there is no connection or link to the employment relationship.

Money received from former employer considered taxable benefit, not a gift Shaw v The Queen, 2013 TCC 256

Kelly Duggleby, Calgary and Al-Nawaz Nanji, Toronto

10 TaxMatters@EY December 2013

The Court found that the payments in this case were “definitely a benefit received by the appellant,” and whether the amounts were taxable turned on whether they were wholly extraneous or collateral to the taxpayer’s employment with Mr. Robert. The Court concluded that the taxpayer did not receive the payments because he was a friend of his former employer, but rather because he was a manager of Robert Ltd. at the time it was sold. The payments were calculated based on $10,000 for each year of service with Robert Ltd. and the letter from Mr. Robert described the payments as a bonus. Finally, the payments were paid to the taxpayer over a two-year period and were conditional on the taxpayer remaining an employee of the CEDA group. These connections to employment meant the payments fell within the ambit of paragraph 6(1)(a) as employment income.

The fact that the taxpayer was not employed by Mr. Robert when he received the payment did not alter the Court’s decision. Although the taxpayer must be an employee or officer, it is not necessary that the person be the employee or officer of the person who bestowed the benefit at the time the benefit was given. All that is necessary is that the taxpayer received the benefit in respect of, in the course of, or by virtue of an office or employment.

ConclusionParagraph 6(1)(a) operates to include as taxable income the value of any benefits of any kind that have even the smallest connection to a taxpayer’s employment, whether the taxpayer is currently employed by the benefactor or not. In this case, the documentary evidence clearly demonstrated a tie to employment rather than a gift. •

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Publications and articles Global Mobility Effectiveness Survey 2013

From structured formal assignments, to an increase in flexible working arrangements to ad hoc business travel — our survey reviews how global companies are trying to resolve the mobility dilemma. We look at talent and strategy and report on the results of the survey with insight from EY leadership and interviews with leading mobility professionals.

Worldwide R&D incentives reference guide

The new Worldwide R&D incentives reference guide delivers an overview of the research and development incentive regimes in 34 countries, including Australia, Canada, Germany, Ireland, Japan, Mexico, the UK and the US. It also gives readers an overview of the European Union’s new Horizon 2020 program.

Websites Business immigration alerts and updates

For the latest information on Canadian and US business immigration issues from Egan LLP, a business immigration law firm allied with EY in Canada, visit EganLLP.com.

Focus on private business

Because we believe in the power of private mid-market companies, we invest in people, knowledge and services to help you address the unique challenges and opportunities you face in the private mid-market space.

Online tax calculators and rates

Frequently referred to by financial planning columnists, this popular feature on ey.com lets you compare the combined federal and provincial 2012 and 2013 personal tax bills in each province and territory. The site also includes an RRSP savings calculator and personal tax rates and credits

for all income levels. Our corporate tax-planning tools include federal and provincial tax rates for small-business rate income, manufacturing and processing rate income, general rate income and investment income.

Tax counsel and litigation

For news and thought leadership from Couzin Taylor LLP, a tax law boutique allied with EY in Canada, visit CouzinTaylor.com.

CA Store Ernst & Young’s Guide to Capital Cost Allowance, 5th Edition

Editors: Allan Bonvie, John Chan, Lokesh Chaudhry, Maureen De Lisser

Takes you through the capital cost allowance and eligible capital expenditure rules in Canada with

commentary and illustrative examples. Unique CCA lookup tables (by class and by item) are included.

Ernst & Young’s Guide to Preparing 2013 Personal Tax Returns

Editors: Maureen De Lisser, Janna Krieger, Gael Melville, and Yves Plante

This is the guide busy tax professionals rely on for quick answers, practical examples and

relevant reference materials when preparing personal tax returns. The guide contains everything you need in one searchable collection with full coverage of the latest tax measures. Available as an internet collection or PDF e-book.

Publications and articles

Learn moreTo subscribe to TaxMatters@EY and other email alerts, visit ey.com/ca/EmailAlerts.For more information on EY’s tax services, visit us at ey.com/ca/Tax.For questions or comments about this newsletter, email Tax.Matters@ca.ey.com.And follow us on Twitter @EYCanada.

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