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: TAXATION OF LOCALLY ENGAGED STAFF SECTION: 115(2)(c),
ART 19]
Mr. Tommy Ellis
Tax Policy Officer
Tax Legislation Division 921630
Department of Finance K.B. Harding
Ottawa, Ontario 957-2111
K1A 0G5
June 4, 1992
Dear Mr. Ellis
Re: Taxation of Locally Engaged Staff
This is in reply to your letter of May 28, 1992 wherein you requested we review your draft reply to XXX.
We have reviewed your draft response and it is our view that the explanation provided therein adequately explains this Department's view of the law. You may wish to change the word "person", in the first line of the last paragraph on page 1 of your letter, to "individual" since paragraph 115(2)(c) of the Income Tax Act is only applicable to individuals.
You may wish to comment on the situation where locally engaged staff in the United States subsequently acquire U.S. citizenship. We are of the view that as long as such individuals are dual citizens of Canada and the United States, Canada will continue to have the right to tax such individuals in accordance with Article XIX of the Canada-U.S. Convention (the "Convention").
It should be noted that in paragraph 2 of Article XXIX of the Convention, the United States preserved its right to tax its citizens as if there was no Convention, however, paragraph 3 of that Article of the Convention, also provides that even for its citizens the United States will honour its commitment under certain articles of the Convention, including Article XIX of the Convention.
We are enclosing a copy of a recent letter sent to the Canadian Embassy in the United States on this matter.
In summary, unless the locally engaged staff in the United States take positive steps to renounce their Canadian citizenship we are of the view that since dual citizens continue to be citizens of Canada, Canada maintains its right to tax such individuals since they continue to meet the conditions set out in Article XIX of the Convention.
We trust our comments will be of assistance to you.
Yours truly,
For Director Reorganizations and Non-resident Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1992
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© Sa Majesté la Reine du Chef du Canada, 1992
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