Provincial Income Allocation: Salaries and Wages to Include All Taxable Benefits

In the Provincial Income Allocation Newsletter No. 4 (March 2013), the Canada Revenue Agency notes that the Allocation Review Committee (“ARC”) has changed its position on amounts previously excluded in calculating “salary and wages paid in the year” for provincial income allocation purposes:

Effective for the 2013 tax year, the amount of salaries and wages paid in the year for the purpose of provincial income allocation calculations will include all taxable benefits that are to be included in the employees’ income in the year. This includes deemed amounts such as stock option benefits under section 7 of the Income Tax Act (Canada), regardless of whether these benefits are deductible in calculating the employer’s income.

Corporations having a permanent establishment in more than one province will need to consider the ARC’s change in position when preparing their next income tax return. Applying the previous year’s method of calculation salaries and wages may fail to include all of the amounts now required to be included in the calculation.

Canada Revenue Agency, employee compensation, Income Tax Act

About Cheryl Gibson

As former head of Dentons' Edmonton Tax Group, Cheryl practises in numerous facets of taxation law. She has extensive experience in the resolution of income tax and GST disputes including criminal tax evasion matters and focuses on getting results in a timely and efficient manner. Cheryl also plans and implements tax-driven corporate reorganizations and the establishment of trusts. She advises on pension matters and has prepared opinions on numerous income tax and GST topics.