Income Tax Severed Letters - 2007-11-23

Ruling

2007 Ruling 2007-0256351R3 - XXXXXXXXXX Corporate Reorganization

Principal Issues: Supplemental Ruling Request to 2007-023388 dated XXXXXXXXXX , 2007. Minor amendments to revise the wording of paragraphs 32, 33.

Position: No effect on original rulings as issued.

2007 Ruling 2007-0235881R3 - Class of German Arrangement & Treaty Benefits

Principal Issues: 1. Whether the German arrangement in issue can be classified as a trust for the purposes of the Income Tax Act?
2. Whether the arrangement is entitled to the benefits of the Canada-Federal Republic of Germany Tax Agreement?

Position: 1. Yes
2. Yes

Reasons: 1. The arrangement meets the essential elements of a trust.
2. The arrangement falls within the ambit of Article 4 of the Treaty.

2007 Ruling 2007-0254581R3 - Supplemental Ruling

Unedited CRA Tags
55(2); 89(1)

Principal Issues: Change in facts

Position: Accepted

Reasons: No impact on the Ruling (document #2007-024174) issued

Technical Interpretation - External

15 November 2007 External T.I. 2005-0153901E5 - Foreign employment income

Unedited CRA Tags
2

Principal Issues: Whether employment income earned by an individual who is a Canadian resident and a U.S. citizen from a U.S. not-for-profit organization is subject to taxation in Canada.

Position: Yes.

Reasons: The individual is subject to taxation on his worldwide income and the income is not exempt from Canadian taxation by the Canada-U.S. Treaty.

14 November 2007 External T.I. 2007-0245631E5 F - Retenue à la source -employé à l'étranger

Unedited CRA Tags
Reg. 102 Reg. 105 115
Summary Under
Tax Topics - Income Tax Act - Section 115 - Subsection 115(2) - Paragraph 115(2)(c)
employment for Canadian employer exercised in France and not exempt from French tax was not deemed to be exercised in Canada
Summary Under
Tax Topics - Income Tax Regulations - Regulation 104 - Subsection 104(2)
no source deductions required of Canadian employer for employee exercising duties in France

Principales Questions: 1. Un employé non-résident du Canada exerce les fonctions de son emploi à l'étranger. Est-ce que son employeur canadien doit prélever de l'impôt sur le revenu fédéral à la source?
2. Est-ce que l'emploi est un emploi assurable aux fins de l'assurance-emploi?

Position Adoptée: 1. Il y aurait probablement une exemption de retenue à la source sur la rémunération de l'employé si l'employé non-résident n'exerce aucune de ses fonctions au Canada. De plus, l'obligation de retenir un montant en vertu du paragraphe 105(1) du Règlement ne s'appliquerait pas.
2. Si l'emploi est exercé à l'étranger et que l'employé est un non-résident du Canada, l'emploi ne serait pas un emploi assurable.

Raisons: 1. Sous réserve de certaines situations spécifiques, le paragraphe 104(2) du Règlement prévoit une exemption lorsque l'employeur verse une rémunération à un employé qui n'était pas employé au Canada et ne résidait pas au Canada. Le paragraphe 105(1) du Règlement ne s'applique pas aux paiements mentionnés dans la définition "rémunération" figurant au paragraphe 100(1) du Règlement parmi lesquels figure un traitement ou un salaire à un agent ou employé.
2. Article 5 du Règlement de l'assurance-emploi.

14 November 2007 External T.I. 2007-0224441E5 - Special Work Site Exclusion

Unedited CRA Tags
6(6)

Principal Issues: Whether the exclusion under subsection 6(6) of the Act on employment at a special work site would apply.

Position: General comments only.

Reasons: Question of fact. We don't have specific details on each employee.

14 November 2007 External T.I. 2007-0253321E5 - Non-resident withholding tax

Unedited CRA Tags
212(1)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 7

Principal Issues: Whether franchise fees paid to a non-resident are subject to withholding tax.

Position: Question of fact.

Reasons: The nature of the payment needs to be analysed.

13 November 2007 External T.I. 2007-0230991E5 - Qualifying period - OETC

Unedited CRA Tags
122.3

Principal Issues: After an assignment of more than six months in another country, an individual (who is a regular employee of a company) spent time in Canada followed by another assignment outside Canada of six weeks. For purposes of the overseas employment tax credit, does the qualifying period include the first and the second assignments (assuming that all other conditions are met)?

Position: To include the second assignment in the qualifying period, we would have to consider that the individual met the all and substantially all test throughout the period (all or substantially all of the duties of employment must be performed outside Canada). Therefore, it depends on whether the time spent performing duties in Canada represents more than 10% of all the employment duties.

Reasons: Paragraph 122.3(1)(b) of the Act. Paragraphs 3, 10 and 11 of IT-497R4. John Rooke v. Her Majesty the Queen (FCA) 2002 DTC 7442

13 November 2007 External T.I. 2007-0229931E5 - Foreign tax credit

Unedited CRA Tags
122.3 126(1)

Principal Issues: An individual is employed by a corporation and works in Angola. He is a factual resident of Canada. He pays income taxes on his remuneration to the Angolan government and pays income tax in Canada on that same remuneration. Is there a disposition in the Act to provide relief from double taxation

Position: General comments on the overseas employment tax credit and general comments on the foreign tax credit.

Reasons: Reference to IT-497R4 and IT-270R3.

8 November 2007 External T.I. 2007-0252651E5 - Post-doctoral fellowship abroad.

Unedited CRA Tags
56(1)(n) 56(1)(o)

Principal Issues: Whether financial support received by a Canadian resident under a post-doctoral fellowship is taxable in Canada.

Position: Yes.

Reasons: Assuming the amount received is not employment income, it is taxable either as a fellowship or a research grant.

8 November 2007 External T.I. 2007-0222831E5 - XXXXXXXXXX

Unedited CRA Tags
81(1)(a)

Principal Issues: Is employment income, received from the XXXXXXXXXX by Canadian citizens who are residents of Canada and who are not residents of the United States, exempt from taxation in Canada?

Position: The employment income is taxable in Canada.

Reasons: According to subsection 5(3) of the Foreign Missions and International Organizations Act, nothing in subsection 5(1) of the FMIOA exempts a Canadian citizen, residing or ordinarily resident in Canada, from liability for any taxes or duties imposed by any law in Canada. It is not a prescribed international organization for purposes of paragraph 110(1)(f) of the Act.

8 November 2007 External T.I. 2007-0228481E5 - US Social Security Benefits

Unedited CRA Tags
56(1)(a) 110(1)(f)

Principal Issues: Is an amount received from US Social Security by the child (Canadian resident) of a deceased taxpayer as survivor benefit under the US Social Security Act taxable in Canada?

Position: Taxable pursuant to paragraph 56(1)(a) of the Act and deduction of 15% of the gross benefit pursuant to Canada-United States Tax Convention and paragraph 110(1)(f) of the Act.

Reasons: subject to any overriding provisions of a tax treaty, residents of Canada are taxable on their world income pursuant to subsection 2(1) of the Act. This includes social security income received from a foreign country. Pursuant to paragraph XVIII(5) of the Canada-United States Tax Convention, only 85% of the payments received under United States social security legislation by a Canadian resident is taxable in Canada and the said payments are tax exempt in the United States. Among the benefits provided under the United States social security system federal old-age, survivor and disability insurance benefits under the United States Social Security Act are commonly referred to as the "social security benefits", covered by the Tax Convention.

7 November 2007 External T.I. 2005-0139501E5 - Residency of International Students

Unedited CRA Tags
2 250

Principal Issues: Residency status of an international student

Position: General comments. IT-221R3. 250(1) and 250(5) provides rules to determine, respectively, whether an international student is deemed to be resident in Canada and whether the international student is deemed to be non-resident of Canada.

Reasons: For the factual residency issue, it is a question of fact. For the deeming rules dispositions of the Act.

5 November 2007 External T.I. 2006-0181641E5 - Reversing Premiums on an Insurance Policy

Unedited CRA Tags
148(9) 148(4) 56(1)(j)

Principal Issues: Does the reversal of premiums in a universal life insurance policy constitute a disposition under section 148 of the Income Tax Act?

Position: Yes.

Reasons: A partial withdrawal from a life insurance policy appears to constitute a partial surrender of the policy.

2006-018164
XXXXXXXXXX Helen Zelobowski
(519) 571-6987
November 5, 2007

Technical Interpretation - Internal

6 November 2007 Internal T.I. 2005-0152091I7 F - Frais de déplacement - activité de divertissement

Unedited CRA Tags
67.1(1) 67.1(4)
Summary Under
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(1)
cost of transporting independent sales reps from an event was “in respect of … entertainment”

Principales Questions: La somme payée pour un divertissement inclut-elle les frais de transport accessoires?

Position Adoptée: Question de fait. En l'espèce, oui.

Raisons: L'article 67.1 de la Loi de l'impôt sur le revenu.

6 November 2007 Internal T.I. 2007-0257621I7 - Overpayment of withholding tax

Unedited CRA Tags
219(1)(j) 164(1) 79(1) Regulation 808

Principal Issues: Whether an amount receivable in respect of refundable Regulation 105 withholdings in a year is an amount that can be included in computing an allowance in respect of investment in property in Canada for the year for the purposes of paragraph 219(1)(j) of the Act.

Position: Generally no.

Reasons: Pursuant to subsection 164(1) the Minister has no obligation to refund the withholdings until after a taxpayer's return of income has been filed

16 February 1999 Internal T.I. 98328570 - CORPORATE PROVINCIAL PERMANENT ESTABLISHMENT

Unedited CRA Tags
section 400 of Regulations

Principal Issues: Whether a permanent establishment exists in a province in offices of related company.

Position: In this case a PE does exist in a province where the business activities of the corporation are carried out in the offices of a related company.

Reasons: The offices of the related company represent the fixed place of business of the corporation. Alternatively those offices may be viewed as the principal place in which the corporation's business is conducted for the purposes of paragraph 400(2)(b) of the Regulations or the employees of the related company may be viewed as agents with general authority to contract for the purposes of paragraph 400(2)(c) of the Regulations.