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 the income from employment earned by an individual who performed work for the XXXXXXXXXX would include income earned as an independent contractor and therefore, not be taxable as a result of the application of subparagraph 110(1)(f)(iii) of the Income Tax Act ("ITA").
Position: Question of fact whether individual is employee or independent contractor. Income from employment does not include earned as an independent contractor. If employee then a deduction will be allowed under 110(1)(f)(iii). If an independent contractor then no deduction allowed.
Reasons: Specific reading of legislation.
July 18, 2012
XXXXXXXXXX Tax Services Office IT Rulings
XXXXXXXXXX Appeals Division Lita Krantz
XXXXXXXXXX (905) 721-5091
Attn: XXXXXXXXXX, 2012-044687
Appeals Officer
Application of subparagraph 110(1)(f)(iii)
This is in reply to your memorandum in which you requested whether the income earned by an individual who performed work for the XXXXXXXXXX would not be taxable as a result of the application of subparagraph 110(1)(f)(iii) of the Income Tax Act ("ITA"). Specifically, you have asked whether the definition of "employment" as that term is used in subparagraph 110(1)(f)(iii) may take on an expanded meaning to include the services provided by an independent contractor as proposed by the taxpayer under objection.
Appeal's Opinion
It is the Appeals Division's opinion that the individual was an independent contractor while performing duties for XXXXXXXXXX and therefore the individual would not be allowed a deduction from taxable income under subparagraph 110(1)(f)(iii) of the ITA.
Our comments are based on the assumption that for purposes of the Act the taxpayer is an independent contractor.
In order to be eligible for a deduction under subparagraph 110(1)(f)(iii) of the ITA, there must be an amount included in the individual's income that is income from employment with a prescribed international organization.
We can confirm that XXXXXXXXXX is considered to be a prescribed international organization.
CPP/EI Appeals Division has determined through a thorough analysis, which uses the factors deemed relevant by the courts, that the individual would be an independent contractor. As a result, the income earned in the period would be considered income from a business. In order to be eligible for the deduction we would have to have the view that "income from employment" also includes "income from business". Subsection 248(1) defines the term "employment" to mean the position of an individual in the service of some other person as opposed to performing services for some other person. Where the individual is an independent contractor, the individual in the course of earning income from a business is performing services for some other person and does not hold a position in the service of that particular person. Therefore, it is our view that "income from employment" could not be said to include income from a business.
Given that subparagraph 110(1)(f)(iii) of the ITA specifically requires that the amount included in the individual's income must be income from employment, the individual in this case would not be eligible for the deduction. The legislation does not allow for a "broader interpretation" of income from employment as requested by the individual.
We trust that these comments will be of assistance.
Yours truly,
Lita Krantz
Assistant Director
International Division/ Division des opérations internationales
International Section III
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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