To avoid being found to carry on a “personal services business” or a “specified investment business” under the Income Tax Act, a corporation must employ “more than five full-time employees”. The CRA, based on several tax court decisions, has stated that this phrase really means “at least six full-time employees”. The Tax Court, in 489599 B.C. Ltd v. The Queen, 2008 TCC 332, has thrown doubt on this position by refusing to follow the cases in question. Instead, the Tax Court held that five full-time employees plus two part-timers could meet the test.
