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.
Dear Mrs. Weimer:
We are writing in reply to your fax dated February 14 concerning the tax status of certain locally engaged employees.
24(1)
Article XIX of the Canada-United States Income Tax Convention (1980) is not applicable in these circumstances because the remuneration paid by Canada is not paid to a citizen of Canada.
Where the remuneration is derived by a resident of Canada, Article XV of the Convention states that the employment income shall be taxable in Canada. However, if the employment is exercised in the United States, as is the case here, the remuneration may also be taxed by them.
In the event that the remuneration is taxed by the American tax authority, the individuals would be entitled to a foreign tax credit in Canada pursuant to subsection 126(1) of the Income Tax Act. The amount of the foreign tax credit that can be claimed is limited to the amount of Canadian tax that would have been payable on the remuneration had it been earned in Canada.
We trust this will be of assistance.
Yours sincerely,
E.E. Campbell Acting Director Provincial and International Relations Division
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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