27 April 1992 Roundtable, 9211430 F - Prairie Tax Conference (Q #13)

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.

Author:  Jim Wilson

April 27, 1992

PRAIRIE TAX CONFERENCE

DRAFT/EBAUCHE

May 19 & 20, 1992

Question 13

Assume that an individual moved from Canada (severed all residential ties) to the United states in 1991.  This individual continues to be employed by a Canadian corporation (not a Crown corporation) and receives a reasonable salary.  The individual was in Canada for 100 days during 1991 and in the U.S. for the remainder.  The salary is paid evenly throughout the year.  The portion paid to the individual after he or she ceases to be a resident of Canada relates to employment exercised in the U.S. and not in Canada and is subject to income tax imposed by the U.S..  Is the corporation required to withhold the maximum amount of income taxes or can the individual request a reduced withholding based on the estimated taxes payable by the individual?  Would subsection 153(1.1) apply?

Department's Position

In this case, during the period of non-resident status, pursuant to paragraphs 115(2)(c) and (d) and section 114.1 of the Income Tax Act ("Act"), for purposes of subsection 2(3) of the Act the individual shall be deemed to have been employed in Canada in the year.  However, pursuant to clause 115(2)(e)(i)(A) of the Act, the remuneration in respect of those services performed in the U.S. will not be included in the computation of Taxable Income Earned in Canada (as computed under paragraph 114(b) of the Act).  In addition, pursuant to paragraph 1 of Article XV of the Canada-U.S. Income Tax Convention, where the individual is liable for tax in the U.S. by reason of his residence or domicile, the U.S. will have exclusive right to tax remuneration received during that period where the services are performed in the U.S..

As the remuneration in the non-resident period in this case is not remuneration described in subparagraph 115(2)(e)(i) of the Act, pursuant to subsection 104(2) of the Income Tax Regulations, the Canadian employer is not required to withhold income tax on such remuneration.