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.
5-911305
Dear Sirs:
Re: Canada-Italy Income Tax Convention
This is in reply to your letter of May 7, 1991 wherein you requested our views on the income tax liabilities of a Canadian resident in the following hypothetical situation as outlined in your letter.
Hypothetical Situation
1. Mr. X is a resident of Canada according to the criteria set out in Interpretation Bulletin IT-221R2.
2. Mr. X is employed in Italy by an employer that does not have a permanent establishment (within the meaning of Article V of the Canada-Italy Income Tax Convention Act,1980 (the "Tax Treaty") or other fixed base in Canada.
3. Mr. X's employer is not a resident of Canada.
4. Mr. X is present in Italy by virtue of his employment for 300 days a year.
Our Comments
The situation outlined in your letter appears to relate to an actual situation involving identifiable taxpayers. Accordingly, the applicable District Taxation Office should be consulted with respect to the income tax liabilities of such a taxpayer. However, we can offer the following general comments.
As a resident of Canada, Mr. X is subject to income tax in Canada on his world income pursuant to subsection 2(1) of the Income Tax Act (Canada) (the "Act"). Pursuant to Article XV of the Tax Treaty, Mr. X is also subject to tax in Italy on income derived from his employment exercised in Italy. As Mr. X is present in Italy for more than 183 days, the exemption from taxation in Italy described in paragraph 2 of Article XV of the Tax Treaty would not be applicable. However, Mr. X would be entitled to claim a foreign tax credit on his Canadian tax return for a taxation year pursuant to subsection 126(1) of the Act with respect to any non-business income tax, within the meaning assigned by paragraph 126(7)(c) of the Act, that he paid for the year to the Italian government. Interpretation Bulletin IT 270R2 sets out the views of the Department with respect to the foreign tax credit found in section 126 of the Act.
Our above comments are general in nature and should not be construed as a complete view of Mr. X's income tax liabilities in Canada. If you have any specific questions regarding Mr. X's tax status in Canada you may wish to consult the applicable District Taxation Office.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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