Canadian Directors Seek Changes To Tax Treatment Of Fees

by Mike Godfrey, Tax-News.com, Washington

25 August 2004

Canada’s Institute of Corporate Directors is lobbying the government for a change in the income tax rules regarding the way in which an independent director’s fee is classified and taxed.

Under Canada's Income Tax Act, independent directors’ fees are currently treated as employment income. However, according to Beverly Topping, President and CEO of the ICD, the existing legislation “does not provide appropriate support for independent directors who incur reasonable expenses to fulfil their duties.”

"Their role is very different from that of an employee and it is unfair that they are not able to deduct these related expenses in the same way as accountants or lawyers,” she argues.

Bernard Wilson, Vice-Chairman of accounting firm PricewaterhouseCoopers and Chairman of the ICD, added:

“Treating independent directors’ fees as employment income is inconsistent with the important corporate governance role demanded from these non-management directors and is dramatically out of step with recent legislative and regulatory initiatives enhancing the status and prominence of the independent director.”

The ICD has sought an expert opinion on the issue of tax treatment of directors’ fees from PwC which it has filed with the Finance Ministry. However, the Institute has yet to recieve a response from the government.

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