Canadian military personnel no longer have to pay income tax when deployed on international operations

DAVID PUGLIESE --- Nov 30, 2017

Chief of the Defence Staff Gen. Jon Vance has outlined changes that have been brought in for income tax and the Canadian Forces. What this means in practical terms, he pointed out, is that soon military personnel will no longer have to pay income tax while deployed on named international operations.

Here are more details from the message Vance sent to military personnel:

Here’s how it will work: CAF members who deployed outside of Canada on a named international operational mission since 1 January 2017 are eligible for income tax relief. This means they will be refunded the income tax they paid during the period of their deployment via their 2017 income tax submission to CRA. For those deploying after 1 January 2018, the military pay system will automatically calculate the income tax to be withheld (if any).

Importantly, this new measure de-links tax relief from risk levels, and raises the eligible deduction from income up to and including the maximum pay incentive level of Lieutenant Colonel (General Specification Officers – GSO). For those on missions in 2017 already eligible for tax relief, this change in pay incentive levels will also be captured through your 2017 tax return.

Commander MILPERSCOM will soon be issuing a CANFORGEN to provide further technical details, and in the coming days, your respective chains of command will communicate more information on how these tax relief measures apply specifically to you.

Q1. What is tax relief?

A1. As was announced in Strong, Secure, Engaged, CAF members on deployed international operations do not have to pay Canadian federal, provincial or territorial income tax earned during the period of time they are deployed. In the past, the decision on who qualified for the relief was tied to the risk level associated with a mission. This new measure de-links tax relief from hardship and risk allowances and increases the maximum amount of tax relief, up to the highest level of pay earned by a Lieutenant-Colonel (General Specification Officers – GSO) in the CAF. These new tax-relief measures aim to ensure all members of the CAF are treated equally and recognize the commitment CAF members and their families make for the defence of Canada.

Q2. What are Hardship and Risk Allowances?

A2. The intent of the Hardship Allowance (HA) is to compensate for the living conditions at a specific post. It is based on an assessment of how much harsher and more difficult the living conditions are in-theatre compared to the home base in Canada. There is also a Hardship Bonus that is a percentage of the HA, and is based on a member’s accumulated months of service on operations. This rate fluctuates according to an individual’s circumstances and previous operational rotations. The intent of the Risk Allowance (RA) is to compensate for the risks associated with a specific post, and is based on the combination of both the probability of a hazard occurring and the severity of the hazard should the CAF member be affected by it.

Q3. When will the new tax measures be implemented?

A3. Based on the Ways and means motion, the Canada Revenue Agency and the Ministère du revenu du Québec have agreed to allow the immediate implementation of these new measures, as announced by both the Ministers of Finance and National Defence. This means Federal income tax will continue to be deducted from the pay of the affected members (those whose missions were not previously considered tax exempt) while they are deployed. However, they will be able to claim the amount they are owed when they file their tax return.

Q4. Who will get the tax relief under the new legislation?

A4. All CAF members deployed on international operations named by the Chief of the Defence Staff (CDS) will receive the tax relief. The new measures will be implemented for the upcoming tax season, and will be retroactive to January 1, 2017. This will be reflected on the affected member’s T-4 or Relevé 1. Examples of such missions are: Operation IMPACT (CAF’s support to the Global Coalition against Daesh in Iraq and Syria) and Operation SOPRANO (CAF’s participation in the United Nations Mission in the Republic of South Sudan). Tax relief will also apply to those who are temporarily assigned to a mission and are required for the conduct and administration of the operations, such as Staff Assistance Visits (SAVs), Staff Inspection Visits (SIVs) or Technical Assistance Visits (TAVs).

Q5. What’s the process for CAF members to get the money?

A5. CAF members affected by the new measure will be able to claim the amount they are owed on their tax return for the 2017 taxation year. The amount of their total income that is tax exempt will be reflected on their T-4 (Box 43) or Relevé 1 (Box A-7). When they file their income tax return, they will be entitled to a refund for the amount of income tax deducted during their deployment. As of 1 Jan 2018, CAF member deployed on eligible operations will not have income tax deducted, up to the highest level of pay earned by a Lieutenant-Colonel (General Specification Officers – GSO) for the period of time they are deployed. This will align them with those members on missions currently considered tax exempt.

Q6. Will civilian members, such as Personnel Support Programs (PSP) staff and political advisors, who deploy to the same operations with military members receive the tax benefit?

A6. The tax relief only applies to members of the Canadian Armed Forces and police officers deployed on international operations.

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