Chapter History S2-F3-C1, Payments from Employer to Employee


The purpose of this Chapter History page is to highlight any amendments to the information contained in an interpretation bulletin that is now reflected in a chapter of an income tax folio as well as to identify any subsequent amendments to a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Update November 26, 2015

Minor changes have been made to improve the usability of the income tax folios:

  • the Summary section has been moved to the top of each folio chapter to be more immediately visible and helpful to readers;
  • the Application and Reference sections have been moved to the end of the Chapter which is more appropriate for administrative content of this nature. However, these sections now appear in the Table of contents for easy access;
  • the statement that folios are only available in electronic format has been moved to the end of the Application section; and
  • the words “as promulgated under the Act” in connection with the Income Tax Regulations have been removed from the Application section, in the interest of using plain language.

The following specific changes have been made to this Chapter:

¶1.1 is revised to change the wording that said employment income is “taxed” in the year received. The wording now specifies that employment income is “included in an employee’s income” in the year received.

¶1.1 is also revised to include two additional sentences to discuss the meaning of the terms salary, wages and other remuneration.

¶1.2 is revised to emphasize the word “deems” in the first sentence.

¶1.3 is revised at the third bullet to remove the introductory word “an” before the word “employment” and to clarify that the applicable private law of the jurisdiction determines whether an employment relationship exists.

¶1.5 is revised to emphasize the words “other than”.

¶1.8 is revised to delete the words “and taxed” from the introduction to the bulleted list.

¶1.9 is revised so that the last sentence is clearer about the timing of the taxation of the amount.

Update April 14, 2015


Income Tax Folio S2-F3-C1, Payments from Employer to Employee, replaces and cancels Interpretation Bulletins IT-196R2, Payments by Employer to Employee and IT-196R2SR, Payments by Employer to Employee.

In addition to consolidating the content of the former interpretation bulletins, general revisions have been made to improve readability. Any substantive technical and interpretive changes to the information outlined in the former interpretation bulletins are described below. Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended.

Legislative and other changes

¶1.7 (formerly included in ¶3 of IT-196R2SR) is updated to remove the discussion regarding a termination payment under subparagraph 56(1)(a)(viii), which was repealed by S.C. 1980-81-82-83, c. 140, s. 26(3). In addition, reference to Interpretation Bulletin IT-365R, Damages, Settlements and Similar Receipts is removed since the publication does not provide any additional information relevant to the discussion in the Chapter.

¶1.8 (formerly included in ¶5 of IT-196R2) is updated to remove the discussion contained in ¶5(d) of IT-196R2, which referenced former subsection 78(3). The version of subsection 78(3) which was in force when IT-196R2 was published, is now reflected in subsection 78(1). Subsection 78(1) (like former subsection 78(3)) deems unpaid amounts to be received when certain conditions are met. Subsection 78(4) now applies to unpaid salary, wages, or other remuneration but does not deem when the amounts are received. Further, subsection 78(5) provides that subsection 78(1) does not apply to unpaid salary, wages, or other remuneration.

Subsections 78(3), (4), and (5) were amended by S.C. 1986, c. 55, s. 21(1), applicable with respect to expenses incurred in tax years beginning after February 25, 1986.

¶1.9 is added to include a discussion of subsection 6(3.1) which was added to the Act by S.C. 2013, c. 34, s. 170(4), applicable to amounts receivable in respect of a covenant agreed to after October 7, 2003.

¶1.10 is added to include a discussion of paragraph 60(f) which was added to the Act by S.C. 2013, c. 34, s. 196(1), applicable to an amount in respect of a receivable covenant that becomes a bad debt after October 7, 2003.

Examples (formerly included in ¶4 of IT-196R2) are expanded to provide additional examples of when subsection 6(3) would apply or not apply. In addition, although the position in example (b) in ¶4 of IT-196R2 is still valid, the example has been removed since inducement payments are discussed in another example.

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