ARCHIVED - Non-Residents - Income Earned in Canada

What the "Archived Content" notice means for interpretation bulletins

NO: IT-420R3

DATE: March 30, 1992

SUBJECT: INCOME TAX ACT
Non-Residents - Income Earned in Canada

REFERENCE: Sections 3 & 115 (also sections 4, 115.1 and 253, subsection 2(3) and the definition of "taxable Canadian property" in subsection 248(1) of the Act, and sections 805 and 7400 of the Regulations)

Application

This bulletin cancels and replaces Interpretation Bulletin IT-420R2 dated March 14, 1985. Current revisions are indicated by vertical lines. Draft legislation to amend the Income Tax Act and related statutes as released by the Minister of Finance on December 20, 1991 is not reflected in the bulletin.

Summary

A non-resident of Canada is subject to tax under section 115 in Part I of the Act on taxable income earned in Canada. The income to be reported for this purpose includes income from an office or employment in Canada (including director's fees and employment benefits), income from carrying on a business in Canada, taxable capital gains from the disposition of taxable Canadian property, and certain other Canadian source income.

Employment and business expenses allowed to residents are generally available to the non-resident to the extent that such expenses are applicable to his or her employment income earned in Canada or income from carrying on a business in Canada, as the case may be. Where the non-resident's employment duties are performed, or business is carried on, both inside and outside Canada, a reasonable basis for allocating the related income is necessary since only the Canadian source income is taxable under Part I. Also, a distinction must be made between the non-resident's income from carrying on business in Canada and income from property in Canada since the latter is generally taxable under Part XIII rather than Part I.

For purposes of determining taxable capital gains, some examples of property included in "taxable Canadian property" are real estate in Canada, capital property used in carrying on business in Canada, and shares of a private corporation resident in Canada.

Other Canadian source income to be reported under Part I includes items such as capital cost allowance recapture and royalty income from a Canadian resource property.

Certain non-residents are deemed to have been employed in Canada in the year and are taxed under section 115 on an extended list of income items.

Some of the deductions in calculating income that are provided for in subdivision e of Division B are available to a non-resident who is taxed under Part I.

Discussion and Interpretation

1. By virtue of subsection 2(3), a person who was not resident in Canada at any time in a taxation year (in this bulletin, referred to simply as a "non-resident") is subject to tax in that year under Part I of the Act on taxable income earned in Canada as determined under section 115 if, at any time in that year or a previous year, the person

(a) was employed in Canada,

(b) carried on a business in Canada, or

(c) disposed of a taxable Canadian property.

This bulletin discusses the income which must be reported and deductions which may be claimed, on the T1 income tax return for non-residents, in computing the non-resident's income earned in Canada for purposes of section 115.

2. A discussion of the further deductions which may be claimed in computing a non-resident's taxable income earned in Canada pursuant to section 115 is outside the scope of this bulletin. For a non-resident individual, such further deductions are discussed in the current version of IT-171. Where an individual was resident in Canada during only part of a taxation year, see the current version of IT-193. Various other amounts of Canadian source income paid or credited to non-residents are not taxed under Part I but rather are subject to non-resident withholding tax under Part XIII of the Act and are discussed in the current version of Information Circular 77-16. For some amounts that would otherwise be taxable under Part XIII (e.g., pension payments), a non-resident may instead elect under section 217 to be taxed under Part I, in which case those amounts are reported on a modified section 115 return. The section 217 election is discussed in the current version of IT-163.

3. The definition of "taxable Canadian property", as discussed more fully in 16 below, is contained in paragraph 115(1)(b). That definition is further expanded by subsection 248(1), only for the purposes of subsection 2(3), to include

(a) property pertaining to the amounts described in 18(a), (c), (d) and (e) below and to a negative balance in the undepreciated capital cost of a timber resource property (see 18(b) below); and

(b) for dispositions occurring after July 13, 1990, a life insurance policy in Canada (see 18(g) below);

ensuring that the related income will be taxable under Part I of the Act.

4. The reference in subsection 2(3) to "a previous year" brings under the taxing provisions of Part I an amount of income listed in section 115 which might otherwise escape taxation if it were received or realized in a year subsequent to the year in which it had been earned. For example, a non-resident individual ceased to be employed in Canada in late 1989 but received remuneration from that employment in 1990. The amount is taxable in 1990 under section 115.

5. To the extent of any inconsistency between the provisions of section 115 and the provisions of a tax treaty between Canada and the foreign country in which the taxpayer resides, those of the treaty will prevail. A discussion on tax treaty provisions is outside the scope of this bulletin.

Income from an Office or Employment

6. To the extent that the duties involved are performed in Canada, income from an office or employment is required by subparagraph 115(1)(a)(i) to be included in a non-resident's calculation of income earned in Canada. The rules of sections 5 to 8 of the Act are generally applicable. Accordingly, income from an office or employment in Canada includes employment benefits (e.g., stock option benefits and deferred amounts under salary deferral arrangements), living and personal allowances, and director's fees, to the extent that these amounts are attributable to services rendered in Canada. The employment income earned in Canada which is reported under subparagraph 115(1)(a)(i) can be reduced by the deduction of expenses described under section 8 of the Act, such as travelling expenses under paragraphs 8(1)(f), (g) or (h), to the extent that they are reasonably considered applicable to such income.

7. By virtue of the rules in section 4, where the duties of a particular office or employment are performed by a non-resident partly inside and partly outside Canada, a reasonable allocation of the related income is necessary since only the portion earned in Canada must be reported under subparagraph 115(1)(a)(i). The income allocation is usually calculated on a per diem basis having regard to the rate of remuneration applicable at the time. For a non-resident who is employed in the transportation of passengers or goods partly inside and partly outside Canada such as by rail, bus, truck or aircraft (and who is not exempt from Canadian tax under a tax treaty), the income allocation may be calculated either on the basis of time or kilometres travelled. Any deductible expenses applicable to the employment duties should be allocated on a basis that is reasonable and consistent with the income allocation, since only the portion of such expenses applicable to the duties performed in Canada is deductible by the non-resident in calculating the income to be reported under subparagraph 115(1)(a)(i). Under the rules in section 4, such an allocation is not made of the deductions allowable under

(a) paragraphs 60(b) or (c) for alimony or maintenance payments,

(b) paragraph 60(d) for interest on succession duties, inheritance taxes or estate taxes, or

(c) paragraph 60(i) and section 146 for premiums or payments under a registered retirement savings plan.

Instead, the full amount of those particular deductions may, where applicable, be claimed by the non-resident after reporting all section 115 income, in accordance with the comments in 29 below.

Income from a Business

8. Income earned in Canada by a non-resident includes, by virtue of subparagraph 115(1)(a)(ii), income from carrying on business in Canada. Supplementing the normal meaning of the term, section 253 deems a non-resident to be "carrying on business in Canada" if

(a) the non-resident solicits orders or offers anything for sale in Canada through an agent or servant, whether the contract or transaction is to be completed inside or outside Canada or partly inside and partly outside Canada;

(b) the non-resident (or an agent acting on behalf of the non-resident) produces, grows, mines, creates, manufactures, fabricates, improves, packs, preserves or constructs, in whole or in part, anything in Canada, whether or not it is exported from Canada prior to its sale; or

(c) the non-resident disposes of

(i) Canadian resource property, except where the disposition results in an amount being included under paragraph 66.2(1)(a) or 66.4(1)(a);

(ii) property (other than depreciable property) that is a timber resource property or an interest in or option on timber resource property; or

(iii) real property (other than capital property) situated in Canada, including an interest in or option on such real property, whether or not the property exists;

provided that the disposition in (i), (ii) or (iii) above occurs after February 20, 1990 (other than pursuant to an agreement in writing entered into before February 21, 1990).

9. Generally, the rules applying to residents for the computation of income from a business apply equally to non-residents. Any exceptions are clearly expressed in the Act or in the Income Tax Regulations.

10. By virtue of the rules in section 4, where a non-resident carries on a business both inside and outside Canada, a reasonable allocation of the related income is necessary since only the portion earned in Canada must be reported under subparagraph 115(1)(a)(ii) (subject to the comments in 12 and 13 below). Generally, the Canadian source income will be the portion attributable to the business operations carried on in Canada. Further comments concerning the determination of a territorial source of income are included in the current version of IT-270. Any deductible expenses applicable to the business (including expenses allowable under section 9) should be allocated on a basis that is reasonable and consistent with the income allocation, since only the portion of such expenses applicable to the business operations carried on in Canada is deductible by the non-resident in calculating the income to be reported under subparagraph 115(1)(a)(ii). Under the rules in section 4, such an allocation is not made of the deductions described in 7(a) to (c) above. Instead, the full amount of those particular deductions may, where applicable, be claimed by the non-resident after reporting all section 115 income, in accordance with the comments in 29 below.

11. The treatment of the income of a non-resident partner from a partnership carrying on business in Canada is discussed in the current version of IT-81.

12. There is no reference in subsection 115(1) to "income from property in Canada", such as income from rent, interest or a dividend. Therefore, except for some of the items discussed in 18 below, a non-resident's income from property in Canada is generally not subject to Part I tax under section 115. Rather, the gross amount is usually subject to non-resident withholding tax under Part XIII of the Act, although in the case of rent, an election can be made under section 216 to pay Part I tax on the net income (see the current version of IT-393). It is also possible for an amount referred to in Part XIII to result in income from carrying on a business in Canada. Where this occurs and the business is carried on through a permanent establishment in Canada, the gross amount will not be subject to Part XIII tax, but rather the resulting net income will be subject to Part I tax under subparagraph 115(1)(a)(ii), by virtue of paragraph 805(1)(a) of the Regulations. Where, on the other hand, an amount referred to in Part XIII results in income from carrying on a business in Canada but not through a permanent establishment in Canada, the gross amount will be subject to Part XIII tax rather than Part I tax.

13. Based on the rules discussed in 12 above, it is important to determine whether an amount described in Part XIII of the Act results in income from property or income from a business, and if the latter, whether the business is carried on through a permanent establishment in Canada. The meaning given to "business" in subsection 248(1) and the extended meaning of "carrying on business in Canada" for non-residents under section 253 (see 8 above) provide guidance in this regard. However, where doubt exists as to the nature of the income earned in Canada, a determination will have to be made based on the facts of the case. Generally, the degree of activity, i.e., the time, attention and labour expended by the non-resident in earning the income, is the major factor. Little or no related activity usually indicates income from property, whereas significant activity usually indicates that a business is being carried on. In determining the nature of the income earned by a non-resident individual from a rental property in Canada, reference should be made to the current version of IT-434. As indicated in that bulletin, where such rental income is characterized as business income, it is considered to be from a permanent establishment in Canada. Where a corporation was incorporated to earn income by carrying on business, there is a general presumption that profits arising from its activities are derived from a business or businesses. However, in some circumstances, a corporation's entire profits can be characterized as income from property, as in the case of a corporation formed for the sole purpose of holding the shares of a second corporation or holding a property to be rented under a long-term lease to a single tenant with limited landlord responsibilities. It is also possible that a corporation could earn both income from property and income from carrying on a business (see the current version of IT-73). With regard to the question of whether a corporation's business in Canada is carried on through a permanent establishment in Canada, the comments in the current version of IT-177 may provide assistance.

14. A non-resident may carry on a resource business or businesses, as described in any one or more of the subparagraphs to paragraph 66(15)(h), at a fixed place or places of business in Canada. Subsection 115(4) applies in a situation where such a non-resident ceases at a particular time ("the particular time") in a taxation year to carry on all such businesses and either

(a) does not, during the remainder of the year, commence any other such resource business at a fixed place of business in Canada, or

(b) disposes of Canadian resource property at any time in the year during which the non-resident was not carrying on any such resource business at a fixed place of business in Canada.

In such a situation, subsection 115(4) deems that

(c) the non-resident's taxation year has ended at the particular time described above,

(d) the non-resident has (only for the purposes of section 115) made a disposition at fair market value, immediately before the deemed end of the year referred to in (c), of all Canadian resource property that was owned by the non-resident immediately after the particular time,

(e) a new taxation year has commenced immediately after the deemed end of the year referred to in (c), and

(f) the non-resident has (only for the purposes of section 115) reacquired at the beginning of the new year referred to in (e) the Canadian resource property referred to in (d) at the same fair market value.

The deemed disposition at fair market value referred to in (d) above can result in an amount or amounts being included under subparagraph 115(1) (a)(ii) as the non-resident's income from carrying on a business in Canada, or under subparagraph 115(1)(a)(iii.1) or (iii.3) which are discussed in 18(a) and (c) below, respectively. Subsection 115(4) can apply, for example, where a non-resident converts a "working" interest in a Canadian resource property to a "royalty" interest and the conditions for the application of the subsection as described above are met.

15. Subsection 115(4) can also apply where the non-resident's resource business in Canada is carried on as a member of a partnership other than a prescribed partnership (see note below) and the situation described in 14 above occurs. In such a case, the non-resident partner's taxation year is deemed to have ended at the particular time when the partnership ceased to carry on all such businesses, and it is the partnership which is deemed to have disposed of all Canadian resource property at fair market value immediately before that time. This deeming provision applies only for the purposes of section 115. Thus, the non-resident partner's share of the partnership's deemed proceeds of disposition of the Canadian resource property may come into the calculation of that partner's income earned in Canada for that taxation year by virtue of one of the subparagraphs in the Act described at the end of 14 above.

Note: Subsection 115(5) provides that subsection 115(4) does not apply to a prescribed partnership. As of the date of this bulletin, there have been no partnerships prescribed in the Regulations for purposes of subsection 115(5).

Taxable Canadian Property

16. Included in a non-resident's taxable income earned in Canada, by virtue of subparagraph 115(1)(a)(iii) and paragraph 115(1)(b), is any excess of taxable capital gains over allowable capital losses that result from the disposition of "taxable Canadian property" or "an interest therein". The latter term is discussed in the current version of IT-176. Paragraph 115(1)(b) describes in detail the properties included in the term "taxable Canadian property". In general terms, the more common items are

(a) real estate in Canada,

(b) capital property used in carrying on business in Canada,

(c) shares of a private corporation resident in Canada,

(d) an interest in a partnership in which at least 50% of the fair market value of assets consists of Canadian resource properties, timber resource properties, income interests in trusts resident in Canada or any other "taxable Canadian properties",

(e) units of certain unit trusts resident in Canada,

(f) capital interests in trusts (other than unit trusts) resident in Canada, and

(g) property deemed by another provision of the Act (e.g., subsection 48(2)) to be taxable Canadian property.

17. Dispositions of taxable Canadian property include deemed dispositions, such as those arising upon the death of a non-resident taxpayer and deemed sales on winding-up a non-resident corporation which held such property (see, however, 21 below). Similarly, proceeds of disposition include deemed proceeds, such as the fair market value of a property disposed of in a non-arm's length transaction where the proceeds would otherwise be a lesser amount.

Other Canadian Source Income

18. The following items of Canadian source income are also required to be included in the computation of a non-resident's income earned in Canada:

(a) under subparagraph 115(1)(a)(iii.1) - a negative amount of cumulative Canadian development expense (CCDE);

For this purpose, a negative amount of CCDE is determined under subsection 66.2(1) and is taxable under subparagraph 115(1)(a)(iii.1) to the extent that it is not already included in computing the non-resident's income from a business carried on in Canada. See also the current version of IT-125 concerning dispositions of resource property.

(b) under subparagraph 115(1)(a)(iii.2) - recapture of capital cost allowance;

Recapture of capital cost allowance, which occurs on the disposition of depreciable property (e.g., a building on a rental property or a Class 33 timber resource property), is determined under section 13 and is taxable under subparagraph 115(1)(a)(iii.2) to the extent not already included in computing the non-resident's income from a business carried on in Canada.

(c) under subparagraph 115(1)(a)(iii.3) - amounts pertaining to a Canadian resource property;

This provision applies where the non-resident carries on in Canada in the taxation year a resource business as described in any one or more of the subparagraphs to paragraph 66(15)(h). The amounts that are taxable under subparagraph 115(1)(a) (iii.3) are all amounts pertaining to a Canadian resource property (e.g., royalties) that would be required to be included in income if the taxpayer were resident in Canada at any time in the year, to the extent that such amounts are not already included in computing the non-resident's income from a business carried on in Canada or the non-resident's income under the above-mentioned subparagraph 115(1)(a)(iii.1). It should be noted that income such as royalties taxable under subparagraph 115(1)(a)(iii.3) will not also be taxable under Part XIII, by virtue of paragraph 805(1)(b) of the Regulations.

(d) under subparagraph 115(1)(a)(iv) - the gain on the disposition of an income interest in a trust resident in Canada;

For this purpose, the gain on the disposition of an income interest in a trust resident in Canada means the excess of the proceeds from the disposition of that income interest, as required to be included in income under subsection 106(2), over the amount relating to that income interest that would be deductible under subsection 106(1) had the taxpayer been resident in Canada throughout the year. For further comments on the subject of the disposition of an income interest in a trust, see the current version of IT-385.

(e) under subparagraph 115(1)(a)(iv.1) - the gain on the disposition of a right pertaining to a partnership as described in paragraph 96(1.1)(a);

Paragraph 96(1.1)(a) applies where the principal activity of a partnership is carrying on a business in Canada and there is an agreement under which an allocation of a share of the partnership's income or loss is made to a person who has ceased to be a member of the partnership or to that person's spouse, estate, heirs or any other person to whom the right to the share of the partnership's income or loss is transferred. The amount that is taxable under subparagraph 115(1)(a)(iv.1) is the excess of the proceeds from the disposition of the right as required to be included in income under subsection 96(1.2), over the amount pertaining to the cost of the right to the person who has made the disposition that would be deductible under subsection 96(1.3) (which is determined in a manner which excludes any portion of such cost that was deductible by that person for a previous year) had the person been resident in Canada throughout the year. See also the current version of IT-242 and IT-278.

(f) under subparagraph 115(1)(a)(v) - for a non-resident person who is deemed to have been employed in Canada in the year, the aggregate of certain amounts;

The non-resident persons who are deemed to have been employed in Canada in the year are discussed in 19 below, and the amounts that are taxable under subparagraph 115(1)(a)(v) are discussed in 20 below.

and

(g) under subparagraph 115(1)(a)(vi) - gains arising from the disposition of certain life-insurance policies in Canada.

Under the combined provisions of paragraphs 138(12)(f) and (g), a "life insurance policy in Canada" is a life insurance policy, including an annuity contract, issued or effected upon the life of a person resident in Canada at the time it was issued or effected. The amount that is taxable under subparagraph 115(1)(a)(vi) is the amount that would have been required by subsection 148(1) or (1.1) to be included in income had the taxpayer been resident in Canada throughout the year.

Persons Deemed to be Employed in Canada

19. Paragraph 115(2)(d) deems a non-resident to have been employed in Canada in a particular taxation year, for purposes of subsection 2(3), if the non-resident was in that year one of the following persons:

(a) a student in full-time attendance at a university, college or other educational institution in Canada which provides courses at a post-secondary school level in Canada;

(b) a student attending or a teacher teaching at a university, college, or other educational institution outside Canada providing courses at a post-secondary school level, if that student or teacher had ceased in a previous year to be resident in Canada in the course of or after moving to attend or teach at that educational institution;

(c) an individual who had ceased in a previous year to be resident in Canada in the course of or after moving to carry on research or any similar work under a grant received by the individual to enable him or her to carry on that research or work;

(d) an individual who had ceased in a previous year to be resident in Canada and who in the current year received remuneration from an office or employment paid directly or indirectly by a person resident in Canada; or

(e) a person who received an amount in the current year under a contract, if the amount was or will be deductible by a taxpayer subject to Part I tax and can reasonably be regarded as having been received in whole or in part, regardless of when the contract was entered into or the form or legal effect of the contract, as

(i) consideration or partial consideration for entering into a contract of service or for services to be performed in Canada (i.e., a signing bonus - see the current version of IT-168), or for undertaking not to enter into such a contract with another party, or

(ii) remuneration or partial remuneration from the duties of an office or employment or compensation or partial compensation for services to be performed in Canada.

20. A non-resident described in 19 above is required by paragraph 115(2)(e) to include the aggregate of the following amounts in income for the year under subparagraph 115(1)(a)(v) (see 18(f) above):

(a) remuneration received in the year from an office or employment and paid directly or indirectly by a person resident in Canada, subject to exclusions described in the current version of IT-161;

(b) the excess of Canadian source scholarships, fellowships, bursaries and prizes, as described in paragraph 56(1)(n), over $500 (see the current version of IT-75);

(c) the taxable portion of Canadian source research grants, as described in paragraph 56(1)(o) (see the current version of IT-75);

(d) Canadian family allowance payments, or any portion of such payments, that would be required to be included in the non-resident's income for the year if he or she had been resident in Canada throughout the year;

(e) the taxable portion of registered education savings plan payments that would be required by paragraph 56(1)(q) to be included in the non-resident's income for the year if he or she had been resident in Canada throughout the year; and

(f) amounts described in 19(e) above received in the year, except to the extent otherwise required to be included in computing income earned in Canada for the year.

Election to Defer Canadian Tax Resulting From a Disposition of Property in Canada

21. A disposition of property in Canada by a non-resident person or partnership in the course of a corporate organization, reorganization, amalgamation, division or similar transaction may result in income earned in Canada for purposes of section 115 in the year of the transaction.

Where the taxation of any profit, gain or income arising from the disposition of property in this type of transaction is deferred in the non-resident vendor's country of residence, double taxation may occur because the most beneficial use of foreign tax credits may not be possible. However, if that country has entered into a tax treaty with Canada that contains a provision that is prescribed under section 7400 of the Regulations, such double taxation may be prevented by section 115.1 of the Act. That section provides a mechanism for deferring Canadian tax resulting from the property disposition. A joint election by the vendor and purchaser in the transaction (the "petitioners") is required, as well as an agreement between the competent authority in Canada and the petitioners to defer Canadian taxation of any gain or income (including profit) resulting from the disposition of property in the transaction. The current version of IT-270 contains further particulars on this mechanism to defer Canadian taxation in this type of transaction. The current version of IT-173 also provides further particulars on the mechanism as it pertains to paragraph 8 of Article XIII of the 1980 Canada-United States Income Tax Convention, which is a tax treaty provision prescribed by section 7400 of the Regulations.

Subdivision e Deductions in Computing Income

22. Subject to the comments below, any applicable deductions in computing income provided for in subdivision e of Division B are available to non-residents in computing income earned in Canada for purposes of section 115. Unless there is an express requirement to the contrary (see 24 below), an applicable deduction under subdivision e need not be related to any particular income that is included in the non-resident's income earned in Canada.

23. Any deduction in subdivision e which requires that the taxpayer be resident in Canada is not available to non-residents in computing income earned in Canada. The following are examples of deductions that are not available to non-residents for this reason:

(a) the deduction under subsection 62(1) for moving expenses (see, however, the exception described in 26 below), and

(b) the deduction for foreign exploration and development expenses under subsection 66(4).

24. Some of the deductions in subdivision e are available only if they relate to amounts included in income under one or more provisions of Part I. Therefore, such a deduction is not available to a non-resident filing a section 115 return where the related income is taxed under Part XIII of the Act. For example, a non-resident who is taxed under Part XIII on annuity payments from Canada cannot claim a deduction under paragraph 60(a), for the capital element of those annuity payments, against income reported on a section 115 return.

25. Where applicable, a deduction for tuition fees was available to a non-resident under paragraph 60(e) and (f) in computing income earned in Canada for the 1987 and prior taxation years. For the 1988 and subsequent years, such a deduction has been replaced by a tuition tax credit in section 118.5. A claim for this tax credit by a non-resident is discussed briefly in the current version of IT-171. A full discussion of the tuition tax credit as it pertains to all taxpayers is contained in the current version of IT-516.

26. For purposes of a deduction for moving expenses, subsection 62(1) requires that the "old residence" and the "new residence" between which the taxpayer moves must both be located in Canada. However, a student who moves in order to be closer to a post-secondary educational institution, whether inside or outside Canada, to commence full-time attendance at that institution may, by virtue of subsection 62(2), deduct the related moving expenses under subsection 62(1) even if the "old residence" or the "new residence" is outside Canada, provided that the other requirements of that subsection are met.

27. A deduction for child care expenses under section 63 is available to a non-resident, provided that the payments involved are made to a Canadian resident for services provided in Canada and the other requirements of that section are met.

28. For the 1989 and following taxation years, a non-resident individual with a disability who is entitled to a disability tax credit (see the current version of IT-171) may also be entitled to claim a deduction under section 64 for expenses for attendant care provided in Canada to enable the individual to earn certain types of income (e.g. employment or business income reported under section 115), assuming all the other requirements of section 64 are met.

29. Subdivision e deductions not discussed in 23 through 28 above are available to non-residents to the same extent as they are to residents. The more common items include deductions for:

(a) maintenance and alimony payments,

(b) RRSP contributions to the extent permitted by section 146,

(c) Canadian exploration and development expenses, and

(d) unemployment insurance benefit repayments (prior to the 1989 taxation year this was not a deduction in calculating income earned in Canada, but rather was a deduction in calculating taxable income earned in Canada - see the current version of IT-171).

Losses from Canadian Sources

30. In calculating income earned in Canada for the year under subsection 115(1), paragraph 115(1)(c) provides that the only losses that are deductible are losses from businesses carried on by the non-resident in Canada. For further particulars regarding the deductibility of losses by a non-resident, see the current version of IT-262.

Related Bulletins

In connection with the subject matter of this bulletin, the current version of one or more of the following bulletins may be of interest to the reader:

IT-73 The Small Business Deduction - Income from an Active Business, a Specified Investment Business and a Personal Services Business
IT-75 Scholarships, Fellowships, Bursaries, Prizes and Research Grants
IT-81 Partnerships - Income of Non-Resident Partners
IT-113 Benefits to Employees - Stock Options
IT-125 Disposition of Resource Properties
IT-161 Non-Residents - Exemption from Tax Deductions at Source on Employment Income
IT-163 Election by Non-Resident Individuals on Certain Canadian Source Income
IT-168 Athletes and Players Employed by Football, Hockey and Similar Clubs
IT-171 Non-Resident Individuals - Computation of Taxable Income Earned in Canada and Non-refundable Tax Credits
IT-173 Capital Gains Derived in Canada by Residents of the United States
IT-176 Taxable Canadian Property
IT-177 Permanent Establishment of a Corporation in a Province and of a Foreign Enterprise in Canada
IT-193 Taxable Income of Individuals Resident in Canada during Part of a Year
IT-221 Determination of an Individual's Residence Status
IT-242 Retired Partners
IT-262 Losses of Non-Residents and Part-Time Residents
IT-270 Foreign Tax Credit
IT-278 Death of a Partner or a Retired Partner
IT-385 Disposition of an Income Interest in a Trust
IT-434 Rental of Real Property by Individual