Many non-profits and charities have and continue to provide assistance to refugees. This CRA letter may be of interest to those who are supporting refugees in Canada. Is financial support payments provided to resettled refugees included in the recipients’ income for income tax purposes? The answer depends on the facts and in some cases it would be included and in other cases, it would not.
Here is the CRA letter:
LANGIND E
DOCNUM 2022-0932801E5
AUTHOR Brennan, Christopher
DESCKEY 25
RATEKEY 2
REFDATE 220511
SUBJECT Refugee Financial Support
SECTION 56(1)(u), 56(1)(r), 153(1), ITR 200(1), ITR 200(2), ITR 233(1)
SECTION
SECTION
SECTION
$$$$
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: Whether the financial support provided to resettled refugees, under the XXXXXXXXXX Program, is included in the recipients income.
POSITION: No.
REASONS: The financial support provided under the XXXXXXXXXX Program does not appear be income from a source under the Act, and therefore would not be included in the income of the recipients.
XXXXXXXXXX 2022-093280 Chris Brennan, CPA, CA
May 11, 2022
Dear XXXXXXXXXX:
Re: XXXXXXXXXX Refugee program
We are writing in response to the letter from XXXXXXXXXX where they request our views on whether the financial support payments provided to resettled refugees, under the XXXXXXXXXX Program (XXXXXXXXXX program), are included in the recipients income for income tax purposes. XXXXXXXXXX.
The letter sent by XXXXXXXXXX included the following background information on the XXXXXXXXXX program:
? The XXXXXXXXXX program provides financial support to resettled refugees, who are survivors of sexual gender-based violence and torture;
? The XXXXXXXXXX program provides financial support to cover rent, living expenses, and basic costs associated with furnishing an apartment to all refugees resettled under the program for two year post resettlement;
? Funds are raised by private donations;
? When Immigration Refugee Citizenship Canada (IRCC) approves an application for resettlement, the funds required to support a refugee in Canada are transferred to their administrative partner XXXXXXXXXX for monthly dispersal to the refugee, and;
? Refugees in the XXXXXXXXXX program are not employed by XXXXXXXXXX. The financial assistance paid under the XXXXXXXXXX program are given voluntarily and are not in exchange for any service, property, or obligation.
XXXXXXXXXX asserted that the XXXXXXXXXX Program does not apply any financial tests in determining the amount of financial support provided to the refugees they sponsor.
Our comments
This technical interpretation provides general comments about the provisions of the Income Tax Act (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 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
Generally, an amount is included in a taxpayer’s income under the Act if it constitutes income from a source or if a specific provision of the Act applies to the type of payment. If the income does not fall within one of these sources of income, it is generally not included in the taxpayer’s income for income tax purposes.
Paragraph 56(1)(u) of the Act includes in the income of a taxpayer a social assistance payment that is made on the basis of a means, needs or income test and that is received by taxpayer, to the extent that the payment is not otherwise required to be included in computing the income of the taxpayer or the taxpayer’s spouse or common-law partner.
The first requirement in paragraph 56(1)(u) of the Act is that the amount must be “social assistance”. The term “social assistance” is not defined in the Act but generally means aid provided by governments or government agencies, although it can also be provided by other organizations (such as a charity), on the basis of need.
The second requirement in paragraph 56(1)(u) of the Act is that the payment must 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:
- An “income” test, which is a test based solely on the income of the applicant.
- A “means” test, which is similar to an income test, but also takes into account the assets of the applicant.
- A “needs” test takes into account the income, assets and financial needs of the applicant.
The financial support, provided under the XXXXXXXXXX program, appears to be “social assistance”. It is a question of fact whether social assistance provided by a sponsoring group, under a private sponsoring refugee program, is made on the basis of a means, needs or income test. XXXXXXXXXX asserts that they do not apply any financial tests in determining the amount of financial support provided to their sponsored refugees. We interpret that assertion to mean that the social assistance, provided under the XXXXXXXXXX is not made on the basis of a means, needs or income test. Based on this assertion, the financial support payments under the XXXXXXXXXX Program would not be considered social assistance payments made on the basis of a means, needs or income test, and would therefore not be included in the recipients income under paragraph 56(1)(u).
The financial support provided under the XXXXXXXXXX Program does not appear be income from a source under the Act, and therefore would not be included in the recipients income for income tax purposes. As such, XXXXXXXXXX should not be issuing a tax reporting slip to sponsored refugees for the amount of financial support they receive under XXXXXXXXXX Program.
We trust these comments will be of assistance to you.
Yours truly,
Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
- XXXXXXXXXX