Income Tax Severed Letters - 2023-10-25

Technical Interpretation - External

21 September 2023 External T.I. 2023-0984251E5 - Ransomware attacks and BEC scams

Unedited CRA Tags
9(1); 18(1)(a); 18(1)(b); 67
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose
ransomware payments generally are deductible

Principal Issues: 1. Whether losses related to ransomware attacks and BEC scams are deductible for income tax purposes. 2. Whether a deduction is available for forgone revenue due to a cyber attack 3. Whether an insurance deductible reduces taxable income.

Position: 1. Question of fact, but generally yes. 2. No. 3. Yes.

Reasons: 1. Payment must be within parameters of subsection 9(1), paragraphs 18(1)(a) and 18(1)(b), section 67, etc. 2. Forgone revenue is not an amount that has been incurred. 3. Only the net insurance recovery is recorded for tax purposes.

11 August 2023 External T.I. 2023-0974121E5 - Reiki practitioners

Unedited CRA Tags
118.2(2)(a); 118.2(2)(e); 118.2(2)(l.9); 118.4(2)
Summary Under
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(2) - Paragraph 118.2(2)(a)
amounts paid to reiki practitioners are ineligible for the medical expense tax credit
Summary Under
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(2) - Paragraph 118.2(2)(l.9)
doubtful that reiki treatment qualified under s. 118.2(2)(l.9)

Principal Issues: Whether amounts paid for reiki treatments that are performed by reiki practitioners would be an eligible expense under the medical expense tax credit (METC) in situations where reiki is prescribed by a medical practitioner as part of a treatment plan.

Position: It seems unlikely, based on our understanding of some of the limitations that may prohibit medical practitioners from prescribing complementary or alternative modalities, as well as the fact that reiki practitioners tend to be independent practitioners. Otherwise, it is possible that the amounts in question would be eligible for the METC, provided that all of the conditions in paragraph 118.2(2)(l.9) are met; these conditions include the requirement that the therapy be prescribed by, and administered under the general supervision of a medical practitioner (within the meaning of subsection 118.4(2)) to a patient who is eligible under section 118.3 (for the disability tax credit).

Reasons: The wording in paragraph 118.2(2)(l.9).

13 March 2023 External T.I. 2022-0947251E5 - Withholding on Payment to Non-Resident Employees

Unedited CRA Tags
115(2)(e)(i) and 153(1) of the Income Tax Act; 101, 102 to 103.1, 104(2) and 200(1) of the
Summary Under
Tax Topics - Income Tax Regulations - Regulation 104 - Subsection 104(2)
remuneration paid by a Canadian corporation to a non-resident (recently, resident) employee was not subject to withholding

Principal Issues: 1. Whether subsection 104(2) of the Income Tax Regulations requires a corporation resident in Canada to withhold income tax from a payment to a non-resident employee for services performed outside Canada where the payment is remuneration that falls within the exception described in subparagraph 115(2)(e)(i) of the Income Tax Act and is paid to a non-resident person who has in the year, or had in any previous year, ceased to be resident in Canada. 2. Whether an information return is required to be filed in the described circumstances.

Position: 1. No withholding is required. 2. The payor (Canadian resident corporation) is require to issue T4 Supplementary Slips and Summary Forms.

Reasons: 1. No withholding is required where a non-resident does not perform duties of employment inside Canada and is subject to tax in country of residence pursuant to subsection 104(2) of the Income Tax Regulations. 2. Subsection 200(1) of the Regulations requires preparation of T4 where salary, wages or other remuneration is paid.

Technical Interpretation - Internal

14 July 2022 Internal T.I. 2020-0869441I7 - Article XVI(4) of Canada-US Treaty

Unedited CRA Tags
2(3); 115(2)(c.1); Article XVI(4) of Canada-US Treaty.
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 16
a US athlete’s Canadian “signing bonus” was in substance employment remuneration for Treaty purposes

Principal Issues: Whether the signing bonus paid to a professional athlete is an inducement payment as described by Article XVI(4) of the Canada-US Treaty.

Position: No.

Reasons: In this particular case, the signing bonus is contractually linked with the requirement to perform employment services and as such, is a payment for employment services.

David Papineau HEADQUARTERS
Team Leader Income Tax Rulings
Special Examinations Directorate
XXXXXXXXXX Kanwal Graham

2020-086944