Exception for Split Income of an Adult Beneficiary

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As of 2018, new measures broaden the rules regarding the taxation of split income so that they now apply to adults resident in Canada who receive split income. Consequently, such adults must pay a tax on the portion of their income that is split income. The tax must be calculated using form TP-766.3.4-V, Income Tax on Split Income.

These rules do not apply to persons engaged in the activities of a business. Such persons can receive income from the business without being subject to the tax on split income.

The amount of split income must be entered on the beneficiary's RL-16 slip. Enter a code describing the split income in a blank box. See the instructions regarding the amounts received by beneficiaries in the Guide to Filing the RL-16 Slip: Trust Income (RL-16.G-V).

Solidary liability for the tax on split income

The age of a specified individual determines who is solidarily liable for the payment of the tax on split income. If the specified individual did not reach age 17 before the taxation year concerned, the individual and the individual's parents are solidarily liable for the payment of the tax. If the specified individual reached age 17 before the taxation year concerned, the tax on the income from a related business is the solidary liability of the individual and of each source individual who is sufficiently related to the related business. The relationship required between the source individual and the related business is described in the definition of related business.

The liability of the parents and of each individual who is related to the specified individual is limited to the amounts included in the specified individual's split income. However, the liability of the specified individual, the individual's parents and of each individual who is related to the specified individual is not limited with respect to interest payable as a result of the application of the measures applicable to the tax on split income.

Note

Income is considered to be business income when it is derived from the supply of property or services or in support of such a supply or when the income is the return from an interest in a trust operating a business.

Income earned from business income is also considered to be direct or indirect business income.

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