26 April 2001 External T.I. 2001-0080195 - OVERSEAS ALLOW. TO SELF-EMP. INDIVIDUAL

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Is there an Income Tax Act (the Act) provision that would exclude an "overseas allowance" paid by the Canadian International Development Agency (CIDA) to a self-employed individual as part of a contract for the performance of services by the individual.

Position: No

Reasons: An "overseas allowance" paid to a person described in 250(1)(b), (c), (d) or (d.1) of the Act is normally considered a "representation or other special allowance". However, such an allowance could only be excluded from income if the recipient is an employee. Such an allowance received by a self-employed individual would be part of the individual's gross business income from which profits of the business would be determined.

XXXXXXXXXX 2001-008019
J. E. Grisé
April 26, 2001

Dear XXXXXXXXXX:

Re: Overseas Allowance to a Self-employed Individual

This is in reply to your letter of April 17, 2001, concerning an allowance received by your client.

Your client is a self-employed individual who has a contract for the performance of services with the Canadian International Development Agency (CIDA). As part of the contract your client receives fees and various allowances including an "overseas allowance" from CIDA. Over the years, your client has received T4A slips from CIDA, which in some years included the overseas allowance as income and excluded the amount in other years.

We share your view that the overseas allowance received by a self-employed individual should be included in computing your client's income from a business. This would be the case whether or not the allowance is excluded or included in a T4A slip issued by the payer. As you indicated, it is possible that an overseas allowance received by an employee may not be a taxable allowance by virtue of subparagraph 6(1)(b)(iii) of the Income Tax Act. We are not aware of any assessing position that would serve to exclude overseas allowances from the income of a self-employed individual.

We are precluded by law from divulging any ongoing or proposed compliance investigation in respect of any taxpayer. We are also not in a position to provide a special dispensation that would exclude an overseas allowance received by a self-employed individual from that individual's income from a business.

We hope our comments are helpful.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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