October 17, 2014
On October 9, at the annual meeting of the Association de planification fiscale et financière (APFF), a $2,500 scholarship was presented to Martin Royer, a student in the Master of Laws, Taxation Option program, for his supervised project entitled “Traitement fiscal du paiement d'une clause restrictive : le point de vue du payeur.”
In his project, Martin conducted an in-depth analysis of the tax treatment of the payment of a restrictive covenant from the payer’s viewpoint, and highlighted the related uncertainties.
He based his paper on the decision by the Federal Court of Appeal in favour of taxpayers in the Fortino v. The Queen and Manrell v. The Queen cases. In both cases the Court was asked to determine the tax treatment for the recipient of a payment in return for a non-competition agreement. In both cases, the Federal Court of Appeal ruled that the payment was non-taxable for the recipient. Following these two decisions, legislators suggested the adoption of section 56.4 of the Income Tax Act, concerning restrictive covenants. Although its provisions are quite exhaustive and complex, they contain few rules regarding the tax treatment for the payer of a restrictive covenant.
The APFF is a non-profit, independent and non-governmental organization bringing together professionals from all economic sectors to support them in their efforts to constantly update their knowledge of taxation and financial planning.