14 September 2001 External T.I. 2001-0095665 - OETC, period less than 6 months

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: Would an individual be entitled to the overseas employment tax credit if they do not meet the 6 consecutive months condition because of a personal crisis?

Position: No.

Reasons: CCRA's long standing position is that the taxpayer must be out of the country for 6 consecutive months. The conclusion was also taken in the situation where the taxpayer was out of Canada for 176 days.

XXXXXXXXXX 2001-009566
M. P. Sarazin, CA
September 14, 2001

Dear XXXXXXXXXX:

Re: Overseas Employment Tax Credit

This is in reply to your letter of July 12, 2001, which was forwarded to us by the Winnipeg Tax Centre, requesting our views regarding the application of the overseas employment tax credit (the "OETC") condition in paragraph 122.3(1)(b) of the Income Tax Act (the "Act").

In order to qualify for the OETC, a Canadian resident individual's employment must be performed outside Canada for a period of at least 6 consecutive months. Since you did not meet the 6 consecutive month condition because of a personal crisis, you ask whether the Canada Customs and Revenue Agency (the "CCRA") will include the time spent on the project prior to and subsequent to the overseas period in determining whether the 6 consecutive months condition is satisfied.

Comments

As explained in Information Circular 70-6R4 dated January 29, 2001, responsibility for the determination of the income tax implications of completed transactions rests with the relevant tax services office. Since your situation involves a completed transaction, we can only provide you with the following general comments.

The OETC may be claimed by an individual resident in Canada who, throughout any period of more than 6 consecutive months, works for a "specified employer" (generally a person resident in Canada) and performed all or substantially all of the duties of employment outside Canada in connection with a contract whereby the employer carried on business outside Canada with respect to the exploration for or exploitation of petroleum, natural gas, minerals or other similar resources, construction, installation, agricultural or engineering activity, or any prescribed activity as well as all activities relating to the obtaining of a contract to perform any of the qualifying activities.

The CCRA's general views regarding the application of section 122.3 of the Act are found in Interpretation Bulletin IT-497R3 entitled "Overseas Employment Tax Credit". Paragraphs 9 to 12 of IT-497R3 discuss the OETC qualifying period. In our view, an individual's employment services have to be performed outside of Canada for a period of at least 6 consecutive months and any time spent in Canada prior to and subsequent to the overseas assignment does not form part of the qualifying period. We note that the Act does not allow the OETC for any overseas period of less than 6 consecutive months. Consequently, whether there is a personal crisis or not, an individual is not entitled to claim the OETC when the 6 consecutive month period condition is not satisfied.

We trust these comments will be of assistance.

Yours truly,

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

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