5 December 1985 Income Tax Severed Letter 5-0090 - [851205]

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.

XXX

DEC 5 1985

Department of External Affairs (RCM) floor A7, 257 L.S. Pearson Building 125 Sussex Drive Ottawa, Ontario K1A 0G2

D.S. Delorey Tel. (613) 995-2433

Dear XXX

This is in reply to your letter of November 22 concerning your employment as XXXXXX

Our comments follow and are based on the assumption that you are a non-resident of Canada at all relevant times (a question of fact).

Employment in Canada

A non-resident is subject to tax in Canada on employment income if the related duties of employment were performed in Canada.

Subsection 115(2) of the Income Tax Act

Among other things, this subsection of the Income Tax Act provides that where the duties of an office or employment are performed outside Canada by a non-resident, the remuneration received by the non-resident in respect of such duties will be taxable in Canada if

(a) the non-resident had, in any previous year, ceased to be resident in Canada,

(b) the remuneration in respect of such office or employment was paid to him directly or indirectly by a person resident in Canada, and

(c) the remuneration is not subject to an income or profits tax imposed by the government of a country other than Canada.

Since you were previously resident in Canada, are being paid by the government of Canada and are not being taxed by another country, the provisions of this subsection will apply to subject to Canadian income tax your remuneration received in respect of the duties performed outside Canada as XXX.

Paragraph 250(1)(c) of the Income Tax Act

Pursuant to this paragraph of the Income Tax Act, a non-resident of Canada will be deemed to have been resident in Canada throughout a taxation year if he was, at any time in the year, an ambassador, minister, high commissioner, officer or servant of Canada and

(a) he was resident in Canada immediately prior to appointment or employment by Canada, or

(b) he received representation allowances in respect of the year.

Although (a) may not be applicable, it is our understanding that you will be receiving representation allowances while serving as a XXXXXX If so, you will be subject to Canadian income tax on your world income received during any part of a taxation year in respect of which you received such an allowance. For example, if you receive such an allowance in respect of 1985, your world income (except exempt remuneration received as an officer of an international organization) for the whole of 1985 will be subject to Canadian income tax. The representation allowance itself is not, however, subject to tax by virtue of the provisions of subparagraph 6(1)(b)(iii) of the Income Tax Act.

Reciprocal Tax Treaties

A person factually resident in a country other than Canada may be exempt from Canadian tax by virtue of a reciprocal tax treaty which Canada has with that other country. This exemption will normally not be available, however, if the individual is posted abroad for the purpose of performing services for the government of Canada. For example, relevant to your situation, the following are the applicable provisions of the reciprocal tax treaties which Canada has with the U.S. and Belgium.

(a) Pursuant to the Canada-U.S. Income Tax Convention (1980), remuneration received by a person resident in the U.S. is taxable only in Canada if it is paid by the government of Canada to a Canadian citizen in respect of services rendered in the discharge of functions of a governmental nature.

(b) Pursuant to the Canada-Belgium Tax Convention (1975), remuneration received by a person resident in Belgium is taxable only in Canada if it is paid by the government of Canada in respect of services rendered to the government of Canada, unless the individual is a national of Belgium or became a resident of Belgium other than solely for the purpose of performing the services.

Summary

Based on the above, it is our view that you are taxable in Canada at least on the remuneration received from the government of Canada and probably on your other income as well, wherever sourced. For 1985, however, this other non-exempt income received in that year will not be subject to tax if you will not be receiving a representation allowance in respect of 1985.

We trust that the above comments will be of assistance. Should you require additional information, we suggest that you contact the district taxation office at 360 Lisgar Street, (Telephone 598-2275).

Yours truly,

for Director Reorganization and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch 115(2)(c) 250(1)(c)