4 June 1992 Income Tax Severed Letter 9215855 - Treatment of Dual Citizen under Government Article

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

SUBJECT: TREATMENT OF DUAL CITIZEN UNDER GOVERNMENT ARTICLE SECTION: ART 19, 115(2)(c)]

Ms. Carol-Lynn Weimer
Benefits Coordinator
501 Pennsylvania Ave. NW 921585
Canadian Embassy K.B. Harding
Washington, D. C. 20001 957-2111

June 4,1992

Dear Ms. Weimer:

This is in reply to your letter of February 5, 1992, addressed to Mr. Barry Edwards of our Source Deductions Audit, which was forwarded to this Division for reply on May 26, 1992. You were requesting our opinion whether a locally engaged individual who was a citizen of Canada and in receipt of remuneration from the Canadian government in respect of services rendered in the discharge of functions of a governmental nature would be liable to tax in Canada after he has acquired U.S. citizenship.

As you are probably aware, section 115(2) of the Income Tax Act provides that where a non-resident person was an individual who had, in any previous year, ceased to be resident in Canada and who was, in a taxation year in receipt of remuneration in respect of an office or employment that was paid to him directly or indirectly by a person resident in Canada, in your case the government of Canada, such individual is deemed to be employed in Canada in the year. Accordingly such individuals are liable to tax in Canada, subject, of course, to the provisions of a tax convention or agreement with the country with which you are concerned.

Article XIX of the Canada U.S. Income Tax Convention (the "Convention") provides that remuneration paid by the government of Canada to a citizen of that state in respect of services rendered in the discharge of functions of a governmental nature to Canada shall be taxable only in Canada and vice-versa in case of a citizen of the United States. While paragraph 2 of Article XXIX of the Convention preserves the right of the United States to tax its citizens as if there was no Convention, paragraph 3 of that Article provides that paragraph 2 does not apply to certain articles of the Convention, including Article XIX.

In situations where an individual falls within the above scenario, the acquisition of U.S. citizenship by the individual would not mean that such an individual is not also a citizen of Canada (i.e. dual citizen). It is our understanding that an individual continues to be a citizen of Canada unless he takes a positive step to renounce his citizenship in accordance with the Citizenship Act. Accordingly, where an individual acquires U.S. citizenship in the situation outlined above, he will continue to be liable for tax in Canada unless he provides the Department with evidence from the Department of Multiculturalism and Citizenship that he is no longer a citizen of Canada. We are enclosing a copy of the Citizenship Act, together with the subsequent amendments, for your convenience. If you require further assistance concerning the Citizenship Act you could contact Mr. Eric Stevens, Legal Advisor at (613)994-1569 or any of the other legal advisors with the Department of Multiculturalism and Citizenship.

It should be noted that the above comments relate to the provisions of the Canada U.S. Income Tax Convention and therefore the determination of the liability for Canadian tax for locally engaged individuals in other tax treaty countries, who have dual citizenship, may produce a different result depending on the wording of the particular tax agreement or convention.

We trust our comments will be of assistance to you.

Yours truly,

For Director
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch