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.
Principal Issues: Is an individual who provides social assistance as described in paragraph 56(1)(u) of the Act (and where none of the exceptions listed in subsection 233(2) of the Regulations apply) required to report the assistance amounts on a T5007 slip.
Position: A person includes an individual and therefore is included in the filing requirements, however, the amount is likely not social assistance.
Reasons: Definition of social assistance.
Author: D'Angelo, Sandro
Section: 56(1)(u), 110(1)(f), 248(1) definition of “person”, regulation 233(1), regulation 233(2), 248
May 26, 2017
David Yip, Programs Officer S. D’Angelo
Taxpayer Services Directorate HEADQUARTERS
Assessment, Benefit and Service Branch Business and Employment Division
750 Heron Road, 7-7014 Income Tax Rulings Directorate
Ottawa ON K1V 1A7
Payments by Individuals to Refugees
We are writing in response to your email of February 27, 2017, concerning payments made by individuals to refugees.
Specifically, you are asking whether an individual who provides social assistance as described in paragraph 56(1)(u) of the Income Tax Act (“Act”), and where none of the exceptions listed in subsection 233(2) of the Income Tax Regulations (“Regulations”) apply, would be required to report the assistance amounts on a T5007 Statement of Benefits (“T5007) slip.
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.
Paragraph 56(1)(u) of the Act requires that social assistance payments received in the year and made on the basis of a means, needs, or income test are to be included in a taxpayer’s income unless such amounts are otherwise required to be included in the taxpayer’s income or the income of the taxpayer’s spouse or common-law partner. Amounts included in a taxpayer’s income under paragraph 56(1)(u) are offset by a matching deduction under paragraph 110(1)(f) of the Act, so that there are no income tax implications related to this income inclusion other than it may affect certain income-tested benefits.
Since the term “social assistance” is not defined in the Act, we look to the meaning of the term as it is ordinarily defined and understood in order to determine whether paragraph 56(1)(u) of the Act applies in a particular situation. Social assistance generally means aid provided by a government or government agency, although it can be provided by other organizations (such as a charity), on the basis of need. As per the Canadian Oxford Dictionary “social assistance” equates to “social security” which is generally defined to be “state assistance to those lacking in economic security and welfare…”.
To be included in income under paragraph 56(1)(u) of the Act, the payment must first be considered social assistance. If the payment is social assistance, the payment must also be made on the basis of a means, needs or income test. We consider each one of these tests to be a financial test and they are described as:
1. An “income” test, which is a test based solely on the income of the applicant.
2. A “means” test, which is similar to an income test, but also takes into account the assets of the applicant.
3. A “needs” test, which takes into account the income, assets and financial needs of the applicant.
Subsection 233(1) of the Income Tax Regulations (“Regulations”) requires every person who makes a payment described in paragraph 56(1)(u) of the Act to file an information return in prescribed form in respect of such payment. Social assistance payments are generally reported on a T5007 slip. A person includes an individual.
Subsection 233(2) of the Regulations excludes from the reporting requirement payments in respect of medical expenses, child care expenses, legal fees, job training or counselling, and funeral expenses. Additionally, payments that are not a part of a series of payments, or that are paid in a year as part of a series of payments but total less than $500 in the year, do not need to be reported on a T5007. The Canada Revenue Agency has indicated that amounts excluded from the reporting requirements do not have to be included in income of the recipient (i.e., they do not have to be reported on the recipient’s tax return).
It is a question of fact whether a payment is, for income tax purposes, social assistance or something else. However, in our view, the assistance of the nature that you described (i.e., assistance provided directly by individuals to other individuals) would likely not be considered social assistance for purposes of paragraph 56(1)(u) of the Act. Therefore, if an amount is not considered social assistance for purposes of paragraph 56(1)(u) of the Act, then the amount does not have to be reported on a T5007 and is not included in the recipient’s income under paragraph 56(1)(u) of the Act.
We trust our comments will be of assistance.
Lita Krantz, CPA, CA
Manager - Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
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