3 April 1991 Internal T.I. 910657 F - Overseas Employment Tax Credit

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: Overseas Employment Tax Credit ("OETC") Taxpayer: 19(1)

This is in reply to your memorandum of February 22, 1991 whereby you requested our opinion as to whether the above-noted taxpayer would be entitled to the OETC.  You described the facts as follows:

24(1)

The OETC authorized pursuant to section 122.3 of the Act is intended to assist Canadian based employers to compete internationally using Canadian resident employees by permitting their Canadian resident employees a reduction in Canadian tax in respect of their income from employment performed outside Canada. The tax credit is only available to individuals who are employees of

Canadian based employers or foreign affiliates thereof and is not available to self-employed individuals.

24(1) 21(1)(b)

We do not have sufficient information to permit us to reach a conclusive opinion, however, we can offer the following general comments which may be of assistance to you:

1.     The individual (19)(1) must be employed by a person who is a specified employer and must have performed all or substantially all  the duties of his employment in one or more countries other than Canada in connection with a contract under which the specified employer carried on business in such other country or countries with respect to any construction, installation, agricultural or engineering activity.  From the information provided.

24(1)

Based on our telephone conversation on March 26, 1991 we understand that you do not have the information that would be needed to analyze this situation completely.  We suggest that the burden is on the taxpayer to prove that 24(1) If it cannot satisfy you in rspect of this point, it should not be provided a waiver.  Accordingly, once additional Information is available we will gladly review the matter again.

2.     As mentioned above, the individual must be employed by a specified employer (i.e. Canadian based employer or a foreign affiliate thereof 24(1)

24(1)

In the last paragraph of your memorandum you question the application of section 122.3 where the taxpayer commutes to a U.S. worksite from his Canadian home on a daily basis.  We have addressed this issue and are of the opinion that as long as all conditions in section 122.3 are met a taxpayer would not be precluded from claiming an OETC because he commuted on a daily basis.

As mentioned above, we do not have sufficient information to formulate a conclusive opinion on  19(1)   eligibility for the OETC.  The permanent establishment issue is  strictly an I.R.S. concern but we will provide our comments to you upon receipt of additional information.  The information needed would include the following:

i)     copies of T1 and T2 returns for at least the 24(1) and subsequent taxation years and any income tax returns filed with foreign jurisdictions on behalf of the individual or 24(1) during that period,

ii)     date of incorporation and articles of incorporation of 24(1)

iii)     copy of all contracts between  24(1)  and  24(1) and details as to here such contracts were negotiated,

iv)     copy of contract of employment between 19(1) and 24(1) (if any).

v)     Are Mr 19(1) wages currently subject to U.S. withholding tax?

vi)     details on other business activities of 24(1) and other employment duties 19(1)

vii)     details of office arrangements for 24(1) or 19(1)   in the U.S.

It should be noted a thorough examination of the relevant documentation may reveal that 19(1) was not entitled to the OETC in prior years.

for DirectorReorganization and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch