12 September 2001 External T.I. 2001-0081975 - XXXXXXXXXX Canadian Taxes

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: Will an amount paid by the XXXXXXXXXX to a resident of Canada be exempt from Canadian taxes?

Position: No.

Reasons: There is no provision in the Act that exempts such amounts from Canadian tax.

XXXXXXXXXX 2001-008197
M. P. Sarazin, CA
September 12, 2001

Dear XXXXXXXXXX:

Re: XXXXXXXXXX Contract Work

This is in reply to your letter of April 22, 2001, requesting our views as to whether amounts paid by the XXXXXXXXXX (the "Organization") to a resident of Canada would be exempt from income taxes under the Income Tax Act (the "Act").

You are of the view that the Organization qualifies under the Foreign Missions & International Organizations Act (the "FMIOA") and, as such, remuneration paid to employees of the Organization that are residents of Canada for purposes of the Act will be exempt from tax under the Act.

Comments

Confirmation of the tax consequences associated with completed transactions are provided by the relevant tax services office. Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance tax rulings, please refer to Information Circular 70-6R4 dated January 29, 2001, issued by the Canada Customs and Revenue Agency. Copies of Information Circulars are available from your local tax services office or on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. However, we can provide you with the following general comments.

The FMIOA, among other things, exempts the international organizations described therein from Canadian tax and exempts certain of its "officials" from Canadian tax on the remuneration earned therefrom. The Governor in Council has, by order, recognized the Organization for purposes of the FMIOA. However, pursuant to subsection 5(3) of the FMIOA, the exemption from Canadian tax does not apply to a Canadian citizen residing or ordinarily resident in Canada.

The Canadian tax implications on such remuneration will depend firstly on the determination of the individual's Canadian residence status while working outside Canada for the Organization. During the period of absence from Canada, the individual would be considered a resident of Canada if he did not sever his residential ties with Canada (i.e., remained factually resident in Canada) or if he is a deemed resident of Canada. It is a question of fact whether the individual would maintain factual residence status while working outside Canada. A deemed resident of Canada will include an individual who was, at any time in the year, an officer or servant of Canada and was resident in Canada immediately prior to his appointment or employment by Canada.

Where the individual is a resident of Canada (factual or deemed), he would be taxable in Canada on his world income, including his remuneration from the Organization, subject to the provisions of an income tax convention. In the event the individual was subject to an internal levy on his remuneration paid to him by the Organization, he would be entitled to receive a tax credit against his federal tax payable pursuant to subsection 126(3) of the Act.

Should you require our assistance with respect to the application of a particular income tax convention, where for example the individual is performing services for the Organization in a country where Canada has entered into a bilateral income tax convention, we would require full details concerning the individual's residency status in both Canada and the foreign country.

We trust you will find the above comments of some assistance.

Yours truly,

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