Can a non-competition agreement (NCA) for which a party agrees not to compete be non-taxable?
Canada (Federal), Canada
The following excerpt is from Pangaea One Acquisition Holdings XII S.À.R.L. v. The Queen, 2018 TCC 158 (CanLII):
In the later decision of Manrell v. R., 2001 CanLII 838 (TCC), [2002] 1 C.T.C. 2543, 2002 D.T.C. 1222 (“Manrell”) the appellant and others had sold their shares in an operating business and agreed to execute NCAs for which they received a payment. Relying on Fortino, supra, the appellants argued that the payment given in exchange for their agreement not to compete was non‑taxable.
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