1 June 1990 Ministerial Correspondence 74624 F - Non-resident Tax for Visiting Teachers and Professors

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.

SUBJECT: Visiting Teachers and Professors - HDB 8413-1

This is in reply to your memorandum dated January 4, 1990 requesting guidelines regarding the length of time a visiting teacher or professor would have to be absent from Canada before the individual could return and resume their teaching duties in Canada without being taxed by Canada on the income earned from teaching.

No such guidelines can be provided.

There is some indication that the original intent of these Treaty provisions was that an individual would be entitled to the exemption only once in his or her lifetime.  However, while the language of the Treaties does not clearly reflect this intention and thus such limitation could likely not be enforced, the Treaties do:

(a)     limit the duration of a visit to 2 years;

(b)     require that the individual be a resident of or be from the other country at the beginning of the visit to Canada.

Accordingly, in order to be eligible for the exemption on a second or subsequent visit; the teacher/professor must be able to establish that his or her return to Canada is not a continuation of the prior visit and that at the commencement of the second or subsequent visit the individual was resident of the other country. For teachers/professors who have already been in Canada for 2 years, this latter requirement may be difficult to satisfy, especially for persons wishing to further extend their "visit" to Canada.  In any case, these are questions of fact and thus each case must be assessed on its own merits although we expect that it would be very rare that an individual could establish eligibility for a second exemption where there has not been a significant hiatus between "visits".

Attached hereto is a copy of a memorandum dealing with this matter as well as certain related issues in more detail. 

21(1)(b)

for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch

Re:  Visiting Teachers and Professors

Issues

(1)     Can 2 year exemption for visiting teachers and professors under certain treaties be used more than once?

(2)     If exemption is available more than once, what period of time must elapse between "visits"?

(3)     "Errors" in IT-68R2.

Comments on Issue No 1

As of 1978, RCT had taken the position that a person was only entitled claim this exemption once in his lifetime.   21(1)(b)

Comments on Issue No 2

(Assuming it is no longer RCT's position that exemption can only be claimed one in lifetime of taxpayer)

There is no specific period of time that if it elapses between visits a further exemption will be available.

There are distinctions among the 5 treaties that provide for this exemption and accordingly each must be considered individually. However, it is submitted that the distinctions between certain of the Treaties do not give rise to different results.

(i)     Finland Treaty

     Article XI of the Canada-Finland Treaty is very similar to Article VIIIA of the 1942 Canada-U.S. Treaty that was considered by the Supreme Court of Canada in H.N.R. v. Stickel 74 DTC 6268 and by the Federal Court Trial  Division in The Queen v. Hunt 77 DTC 5404.  In these cases  the Court held that the exemption was based upon the taxpayer's intention; e.g. so long as he arrived for the purpose of teaching for not more than 2 years he was exempt, but once he intended to stay in Canada for more than 2 years the exemption ceased.  The relevance of these decisions in the present case is that they support the proposition that once the taxpayer forms the intent to be in Canada beyond 2 years the exemption ceases and a temporary departure from Canada should be irrelevant.

     The principal problem however remains the definition of "visits".  Once it is recognized that a person may make more than one exempt visit, as I believe must be conceded - there is absolutely nothing to suggest otherwise - and having in mind the above noted decisions of the Courts, it is submitted that it becomes entirely a matter of the subjective intent of the person as to whether a departure and return to Canada signifies the commencement of a new and separate visit.

     It should however be noted that in order to be eligible for the exemption the teacher must have been resident in Finland immediately before his appointment. Accordingly if at the time of commencing the subsequent visit to Canada the teacher/professor is no longer resident in Finland, e.g. because he became a resident of Canada, the exemption will not be available.  This limitation will probably cover many teachers/professors who wish to extend their visits beyond two years through the device of a temporary departure from Canada.

(ii)     Norway and Trinidad & Tobago Treaties

     These treaties are very like the old Treaty considered by the Tax Appeal Board in Dorian Smith v. M.N.R. 70 DTC 1594. While the language of this Treaty is not as supportive of the approach (in favour of the taxpayer) adopted by the Courts in connection with the 1942 US Treaty, in Smith the Court held that the old UK Treaty should be interpreted in essentially the same manner as the Courts subsequently held the 1942 US Treaty should be interpreted.  Accordingly, my comments regarding the Canada-Finland Treaty apply to these Treaties as well, subject to the caveat that basing the determination upon the intention of the teacher/professor is not as justifiable having regard to the language utilized in these treaties compared to the 1942 US Treaty and the  Canada-Finland Treaty and thus the Tax Appeal Board decision in Smith could yet be overruled. However, I consider that this is unlikely.

(iii)     Ireland and Denmark Treaties

     These two treaties are quite different from the Treaties referred to above.  In the Ireland and Denmark Treaties there is no reference to the "purpose" of the visit. Nor is the term "visits" used.  Under these treaties what is exempted is remuneration from teaching received "during a period of temporary residence not exceeding two years at a university, etc. in the other territory".  (Note: under Ireland Treaty exemption only available in respect of teaching at an institution of "higher education").

     Under these treaties it is not stated that the teacher/professor must have been "resident" of Ireland or Denmark at the commencement of the term but he/she must be "from" Ireland or Denmark, as the case may be.

     While again it is submitted that a person can be eligible for the exemption more than once during a lifetime, in the case of these Treaties the period of "temporary residence" in Canada must not exceed two years and thus if the teacher temporarily departs and then returns to Canada, it is a question of fact as to whether there is a of the prior status of "temporary residence" or a termination of that prior status and the commencement of a new period of temporary residence.  Also, on the subsequent period of temporary residence in Canada, the teacher must becoming from Ireland or Denmark and presumably must have some connection to that Country (beyond having simply come from there in transit from somewhere else) in order to have the benefit of the Treaty.

(3)     (a)  Paragraph 1(b) of IT-68R2 states that:

     "a period not exceeding two years means one period that does not exceed 24 months".

21(1)(b)