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.
Principal Issues: Whether an embassy of a foreign government in Canada can be compelled to comply with its remittance obligations.
Position: No
Reasons: Embassies enjoy immunities from such obligations.
XXXXXXXXXX
2012-043412
January 25, 2012
Dear XXXXXXXXXX :
Obligation by a Foreign Embassy to Withhold and Remit
Payroll Deductions for Locally Engaged Canadian Resident Employees
We are writing to advise you that our views in reference to the above issue as set out in our letter to you dated January 25, 2010 have changed. In that previous letter we expressed the view that a foreign embassy located in Canada is required to withhold and remit payroll deductions for locally engaged Canadian resident employees who are employed by the foreign embassy to perform services in Canada.
It has come to our attention as a result of consultations with the Department of Foreign Affairs and International Trade Canada ("DFAIT") that it has been DFAIT's long-standing view that while foreign missions in Canada are encouraged to respect Canadian laws, they cannot be compelled to adhere to them and are not subject to the jurisdiction of Canadian courts if they do not adhere to them. Therefore, even if the provisions of the Income Tax Act and Canadian social security legislation were interpreted to apply to embassies in Canada, those embassies enjoy immunity from these statutes as a result of the State Immunity Act, the Vienna Convention on Diplomatic Relations (arts. 23 and 33) and customary international law.
We now agree with DFAIT that foreign states and their embassies in Canada enjoy immunity from the obligations found in the Income Tax Act and Canadian social security legislation for remitting source deductions in respect of locally-engaged staff. As such, embassies of foreign states in Canada cannot be compelled to make such source deductions. They may, however, wish to consider voluntarily making source deductions in the interests of their locally engaged staff.
We apologize for any inconvenience our earlier response may have caused you.
Olli Laurikainen
For Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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