31 January 2000 External T.I. 1999-0009435 - REMUNERATION OF CANADIAN FOR WORK IN U.S.

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: Taxability of remuneration earned by Can employee in U.S.

Position: If employee's presence less than 183 days and not borne by U.S. employer or U.S. permanent establishment, not taxable in the U.S. From facts given both these conditions are met.

Reasons: Law - paragraph 2(b) of Article XV of Canada-U.S. Convention

XXXXXXXXXX 1999-000943
J. Stalker
Attention: XXXXXXXXXX

January 31, 2000

Dear Sirs/Mesdames:

Re: Article XV of the Canada - U.S. Income Tax Convention (the "Convention")

This is in reply to your facsimile transmission of February 2, 1999 and in follow-up to our phone message to you of February 3, 1999 (Major/XXXXXXXXXX).

You have described a situation where individuals who are resident in Canada and are employed in Canada may provide services in the U.S. to various third parties under their employer's contracts. The Canadian employer bills the U.S. clients. Although each contract is less than $10,000, the remuneration that an employee receives for the U.S. contract work is in excess of $10,000. Usually the employee spends less than 183 days a year on the U.S. contracts. You have asked if such an employee would be taxable in the U.S. pursuant to paragraph 2 of Article XV of the Convention.

Provided that the Canadian employee was not present in the U.S. for more than 183 days, and his or her remuneration is not borne by an employer who is a resident of the U.S. nor by a permanent establishment of his or her employer in the U.S., the employee will not be taxable in the U.S., pursuant to subparagraph 2(b) of Article XV of the Convention.

We note that it is a question of fact whether an individual is an employee of the Canadian company, but based on the limited information provided it would appear that the individuals described above are employees of the Canadian company. Also, in respect of paragraph 2(a) of Article XV, whether or not an employee's remuneration exceeds the $10,000 limit referred to in that paragraph depends upon the amount the employee receives for all services rendered in the year in the other country. In the above case, amounts received for services rendered under different contracts of the employer are accumulated for the purpose of this determination.

We trust our comments are helpful.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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