27 June 2024 External T.I. 2024-1010821E5 - Income from employment with the EBRD

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 income from employment with the European Bank for Reconstruction and Development is subject to tax under the Act.

Position: If earned by a Canadian citizen residing or ordinarily resident in Canada, yes, otherwise, no.

Reasons: Under the European Bank for Reconstruction and Development Agreement Act, employees are not subject to national income tax on their salaries and emoluments. However, Canada deposited a declaration with its instruments of ratification that it retained the right to tax Canadian citizens residing or ordinarily resident in Canada on such salaries and emoluments.

XXXXXXXXXX									2024-101082
K. Graham

June 27, 2024

Dear XXXXXXXXXX:

Re: Taxation of employment income from the European Bank for Reconstruction and Development

We are writing in reply to your request for a technical interpretation dated February 6, 2024, on behalf of your client, XXXXXXXXXX (“Taxpayer”). In particular, you asked whether the Taxpayer’s income from employment earned from the European Bank for Reconstruction and Development (“EBRD”) is exempt from income tax in Canada.

In your request and our subsequent email communication, you identified the following facts:

• The Taxpayer is employed with the EBRD in Lebanon.
• During the period March 1, 2023 to October 21, 2023, the Taxpayer had “permanent resident” status in Canada and worked remotely for the EBRD.
• The Taxpayer is not a Canadian citizen.

You stated that although the EBRD is not affiliated with the United Nations (“UN”), it undertakes similar development and humanitarian projects as the UN and since income from employment with the UN is exempt from Canadian income tax, you asked whether income from employment with the EBRD is accorded the same treatment.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act, R.S.C. . 1985, c. 1 (5th Supp.) as amended (“Act”). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC70-6R12, Advance Income Tax Rulings and Technical Interpretations. However, we offer the following general comments, which may be of assistance to you.

Please note that all legislative references in this letter refer to the Act or the Income Tax Regulations, unless otherwise specified.

In computing a taxpayer’s taxable income for a taxation year, subparagraph 110(1)(f)(iii) permits the deduction of an amount that is income from employment with a prescribed international organization. In accordance with Income Tax Regulation 8900(1), the prescribed international organizations for the purpose of subparagraph 110(1)(f)(iii) are the UN and each international organization that is a specialized agency brought into relationship with UN in accordance with Article 63 of the UN Charter. The EBRD is not a prescribed international organization for the purpose of subparagraph 110(1)(f)(iii).

Certain amounts are not included in the computation of a taxpayer’s income for a taxation year. Pursuant to paragraph 81(1)(a), an amount that is declared exempt from income tax by any other enactment of Parliament, other than an amount received or receivable by an individual that is exempt by virtue of a provision contained in a tax convention or agreement with another country that has the force of law in Canada, is not included in the computation of income.

Canada approved the Agreement Establishing the European Bank for Reconstruction and Development (“Agreement”) under the European Bank for Reconstruction and Development Agreement Act, S.C. 1991, c. 12. Although Article 53(6) of the Agreement provides that employees of the EBRD are exempt from national income tax on their salaries and emoluments, Article 53(7) permits a member of the EBRD to deposit, with its instrument of ratification, acceptance or approval, a declaration that such member retains right to tax salaries and emoluments paid by the EBRD to citizens or nationals of such member. Canada made such a declaration when it signed the instrument of ratification for the Agreement. That declaration reads as follows:

“Pursuant to paragraph 7 of Article 53 of the Agreement, the Government of Canada declares that Canada retains for itself, its political subdivisions or its local authorities, the right to tax salaries and emolument paid by the Bank to Canadian citizens residing or ordinarily resident in Canada.”

Consequently, where a taxpayer that is not a Canadian citizen residing or ordinarily resident in Canada is employed with the EBRD, the salaries and emoluments from such employment are not included in the computation of their income for a taxation year pursuant to paragraph 81(1)(a).

We trust our comments are of assistance.

Yours truly,

Angelina Argento
Section Manager
for Division Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch