An arm's-length: This refers to the bargaining position of two unrelated parties whose mutual dealings are only influenced by their independent interests. It describes a standard of dealing that reflects no motivation other than those normally expected on the part of two unconnected parties transacting in good faith in the ordinary course of business.

Non-arm’s-length: Unlike arm’s-length employees, Non-arm’s length employees do not get E.I deducted from their payroll except under special circumstances. Furthermore, their wages and earnings are considered non-allowable deductions for Agristability purposes. For purposes of the Income Tax Act, two or more individuals are related and not dealing at arm’s length if any of the following is true:

1. One is the child or other descendant of the other (includes by adoption);
2. They are siblings;
3. They are married to each other (includes common-law);
4. One is married to a person who is connected to the other, as described in point 1 and 2 (mother/father/brother/sister-in-law).

Last updated on November 7, 2019 by FCC AgExpert