12 December 1991 Administrative Letter 9134356 F - Tax Status of Canadians Working for the OECD

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.

MEMO FOR FILE

Rulings Directorate Foreign Section

5-913435

Tax Status of Canadians Working for the O.E.C.D. Question:

I received a telephone enquiry from a Canadian citizen

24(1)

Note: It is my understanding that O.E.C.D. employees are not subject to tax by either the Government of France or the O.E.C.D. (ie. an internal levy), therefore the concern here is for Canadian tax implications on such remuneration.

Answer: My reply to19(1) was based on the following:

General Comments

1.      The taxpayer is either a factual resident or deemed resident of Canada.  We do not have sufficient information to determine factual residence status while abroad, however, due to the fact that he has a job to return to ( and therefore likely has other ties with Canada  —  furniture in storage, etc.) there is a possibility he will maintain factual residence status (particularly under the concept of "ordinarily resident").  In the event he is not a factual resident, he is certainly a deemed resident (eg. 250(1)(e) as a spouse of a deemed resident or 250(1)(c) in the case where he is still considered an officer or servant of Canada while on leave of absence  —  which I believe is a possibility).

2.      Ignoring the Canada – France Income Tax Convention, the taxpayer would be subject to Canadian tax on his world income including any remuneration from the O.E.C.D. (subject to any exemption from tax provided for under the Privileges and Immunities (International Organizations) Act ("P.I.I.O.A.").  Had the O.E.C.D. withheld an internal levy, subsection 126(3) would provide a tax credit to the taxpayer (since the O.E.C.D. is an organization as defined in the P.I.I.O.A.  —  see comments below) in a manner similar to the FTC rules (ie. up to the Canadian tax attributable, if any, to that remuneration).  Where the O.E.C.D. is a special agency that is brought into relationship with the United Nations in accordance with Article 63 of the Charter of the United Nations, a tax credit under s.s. 126(3) can be claimed even if no internal levy was withheld.  I do not believe the O.E.C.D. is such an agency however the issue would have to be researched.  This could be relevant where the taxpayer is not exempt from Canadian tax on such remuneration (ie. there would be Canadian tax attributable to that source  —  126(3)).

3.      Since the O.E.C.D. is recognized as an international organization (*by virtue of an order-in-council) under the P.I.I.O.A., "officials" of that organization are exempt from Canadian tax by virtue of paragraph 3(2)(d) of the P.I.I.O.A. to the extent such exemption is provided in the actual "Agreement on Privileges and Immunities between Canada and the O.E.C.D.".  Generally these Agreements are standard and provide for such exemption but the document should be requested from External Affairs in the event of a written enquiry.

The above exemption, however, does not apply to any Canadian citizen residing or ordinarily resident in Canada (s.s. 3(3) of the P.I.I.O.A.).  In the event the taxpayer is an official of the O.E.C.D. and is a deemed resident of Canada (ie. not factually resident), the latter rule will not apply because s.s. 250(1) has no affect on the meaning of "residing" under the P.I.I.O.A.. 

To summarize, Canadian citizens who are deemed residents of Canada and are officials of the O.E.C.D. are exempt from Canadian tax by virtue of paragraph 81(1)(a) of the Income Tax Act (see conclusion below).  The concept of "ordinarily resident" here should not affect a deemed resident because under the ITA such a person would be considered a factual resident (s.s. 250(3)).

21(1)(b)

4.      The meaning of the word "official" in this regard is described in paragraph 5 of IT-397R.

5.      The P.I.I.O.A. does not provide exemption from Canadian tax to Canadian residents (either factual or deemed) who are employees of an international organization covered under that statute unless they are "officials" thereof.  Accordingly, Canada has a right to tax any remuneration earned by such Canadian residents (we would provide a tax credit under 126(3) where an internal levy was made or in some cases even where no internal levy was made - see #2 above) subject to a tax treaty.

5.      The "Diplomatic and Consular Officials" Article of most treaties (including the Canada–France treaty) states that the treaty does not apply to "officials" of international organizations located in that State.  Therefore, the above comments stand.  However, where the taxpayer is an employee who is not an official of the organization, the treaty applies.

Where the taxpayer is a resident of the other State for purposes of the treaty (eg. tiebreaker rules), the other state will likely have exclusive right to tax such remuneration as it is from employment exercised in that State.  Where the taxpayer is a resident of Canada under the tiebreaker rules, the treaty will not affect Canada's right to tax.

6.     21(1)(b)

Conclusion

24(1)

I explained the above and recommended he request a determination of "factual residence" status from the Ottawa D.O. in spite of the fact he is a deemed resident.  I also suggested that this is a very technical issue that he should write in if he wants to be sure of the tax implications.

21(1)(b)

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