2002 Ruling 2002-0126993 - ATR SPECIAL WORKSITE

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 CCRA.

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

Principal Issues: For a group of employees, will a work location constitute a "special work site" under subsection 6(6) of the Act, thereby excluding from each employee's income the benefits they receive in respect of transportation and board and lodging?

Position: Yes.

Reasons: Even though the period in which the employees may be at the work location is beyond the two-year period noted in paragraphs 5 and 6 in IT-91R4, the facts of this situation are such that the duties of employment are considered of a temporary nature.

XXXXXXXXXX 2002-012699

XXXXXXXXXX, 2002

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling Request - XXXXXXXXXX

This is in reply to your letter dated XXXXXXXXXX, as amended by your facsimiles of XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of certain employees at the XXXXXXXXXX regarding the special work site provision under subsection 6(6) of the Income Tax Act.

We understand that, to the best of your knowledge and that of the taxpayers involved, none of the issues involved in the ruling request:

(i) is in an earlier return of a taxpayer or a related person,

(ii) is being considered by a tax services office or taxation center in connection with a previously filed tax return of a taxpayer or a related person,

(iii) is under objection by a taxpayer or a related person,

(iv) is before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired, and

(v) is the subject of a ruling previously issued by the Directorate.

Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended, (the Act) and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.

Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:

Definitions

(a) "The Employer" is the XXXXXXXXXX;

(b) "The Campus" is a location in XXXXXXXXXX where the Employer has a contract with that country's government to provide educational programs and courses at the post-secondary level;

(c) "The Secondees" are employees currently working for the Employer in Canada, who will be required to be at the Campus to enable the Employer to carry out its contractual obligations; and

(d) "The Secondment Period" is the duration of time the Secondees will be assigned by the Employer to the Campus, such a period not to exceed three years.

Facts

1. The Employer is a Canadian resident corporation that is a teaching institution operating in Canada.

2. The Employer's contract at the Campus includes a start-up period XXXXXXXXXX (the Start-up Period), and an operational period that will run XXXXXXXXXX (the Operational Period).

3. Educational programs to be offered at the Campus are of a one, two and three-year duration.

Proposed Transactions

4. The Employer will fulfill its contractual obligations at the Campus, which will include:

(a) the delivery of a fully operational college at the Campus so that instruction for the first class of entering students can commence by the end of the Start-up Period;

(b) during the Operational Period, the operation and management of the Campus;

(c) the transfer to the Campus of its academic, industrial, business and management practices that would be required for a smooth operation of the Campus;

(d) all steps necessary to ensure that the programs of study offered at the Campus are accredited academically and professionally by the same agencies that accredit corresponding programs of the Employer in Canada;

(e) the recruitment, employment and management of all administrative personnel, faculty and staff for the Campus;

(f) the recruitment, admittance and enrolment of students to the Campus;

(g) all steps necessary to ensure that programs offered at the Campus are equal in quality to corresponding programs offered by the Employer in Canada; and

(h) to the extent approved, the responsibility for procuring, maintaining and servicing all equipment, fixtures, systems, materials and other supplies necessary for the commencement of instruction at the Campus by the end of the Start-up Period, and the operation of the Campus during the Operation Period.

5. Prior to commencement of the Operational Period, the Employer will enter into individual employment contracts with the Secondees, which will provide for a temporary assignment of employment duties to the Campus for the Secondment Period.

6. The Secondees will be required to sign individual employment contracts, which provide that they will:

(a) continue to be employed by and paid by the Employer during the Secondment Period;

(b) retain the seniority rights they currently hold with the Employer;

(c) continue to be paying members in the Employer's registered pension plan;

(d) continue to hold union membership, if currently applicable; and

(e) be integrated back into the Employer's operations in Canada at the end of the Secondment Period.

7. The Secondees will continue to be taxable as residents of Canada under subsection 2(1) of the Act.

8. The Secondees will receive a remuneration and benefits package at the Campus, which will include:

(a) board and lodging comprised of:

A. a per diem allowance of $XXXXXXXXXX (US) while physically present at the Campus, intended to offset the additional expenses incurred by the Secondees while living at the Campus, such as the costs associated with food purchases, and
B. housing provided by the government of the country where the Campus is located, with a value between $XXXXXXXXXX (US) and $XXXXXXXXXX (US), such housing being based on job classification; and

(b) an annual trip directly from the Campus to the Secondee's place of residence in Canada for the employee and his or her family, paid by the government of the country where the Campus is located, with a value between $XXXXXXXXXX (US) and $XXXXXXXXXX (US) per person.

9. The Secondees will maintain their self-contained domestic establishments in Canada as their principal place of residence throughout the Secondment Period.

10. The principal place of residence will be available for the Secondees occupancy and not rented to any other person throughout the Secondment Period.

11. Because of the distance from the Campus, it is not reasonable to expect the Secondees to return daily to their principal place of residence.

12. The duration that the Secondees are required by their duties at the Campus to be away from their principal place of residence is not less than 36 hours.

13. The Secondees will complete Form TD4 "Declaration of Exemption - Employment at a Special Work Site" and file it with the Employer.

14. The Employer will enter into employment contracts with the Secondees to assign them to the Campus for the Secondment Period, such contracts to provide for the benefits noted in 8 above.

Purpose of the Proposed Transactions

15. The purpose of the proposed transaction is:

(a) to enable the Employer to recruit qualified personnel to fulfill its contractual obligations at the Campus; and

(b) to provide financial assistance to the Secondees to offset the additional costs incurred by them to work at the Campus for the Secondment Period.

Rulings Given

16. Provided that:

(a) the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and the purpose of the proposed transactions;

(b) the proposed transactions are completed in the manner described above; and

(c) there are no other transactions, which may be relevant to the ruling requested,

Our rulings are as follows:

A. Provided the amounts in 8 above are reasonable for each Secondee, we confirm that the Campus will constitute a special work site within the meaning assigned to that term in subsection 6(6) of the Act, thereby excluding from each Secondee's employment income for the Secondment Period, the benefits described in 8 above; and

B. Subsection 245(2) will not apply to redetermine the tax consequences in the ruling given.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R4 issued by the Canada Customs and Revenue Agency ("CCRA") on January 29, 2001, and are binding on the CCRA provided that the proposed transactions are implemented on or before XXXXXXXXXX.

These rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the rulings provided herein.

Except as expressly stated, these rulings do not imply acceptance, approval or confirmation of any income tax implications of the facts or proposed transactions.

Yours truly,

XXXXXXXXXX
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch