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.
XXXXXXXXXX K. B. Harding
June 18, 1993
Re: Overseas Employment Tax Credit (OETC)
This is in reply to your letter of March 2, 1993 wherein you requested our opinion with respect to the following hypothetical situation.
An individual is employed by a specified employer carrying out qualifying activities overseas for six consecutive months or more and otherwise meets all the other qualifications set out in section 122.3 of the Income Tax Act (the "Act").
You indicated that in some situations the employer requires the employee to work for one month in the foreign country and then have a one-month holiday. You are concerned that where the employee is permitted by the specified employer to engage in other activities in Canada during his one month off on holidays that this might prevent the employee from qualifying for the OETC. As an example, if the employee received incidental consulting income while in Canada or his corporation received incidental consulting income from his services but did not pay him a salary in respect of such services, would such employee qualify for the OETC.
Paragraph 122.3(1)(b) of the Act requires that the employee perform "...all or substantially all the duties of the individual's employment outside Canada ...". Accordingly, where the employee performs more than 10% of his duties of employment while he is in Canada, he would not meet the "all or substantially all" (90% or greater) test. It is our view that the measure of the "all or substantially all" test is based on the comparison of the time actually worked in Canada for his employer during the qualifying period as compared with the total time he actually worked in that same qualifying period. For example, if the individual worked 10 (8 hour days) in Canada and 100 (8 hour days) outside Canada in the qualifying period, the individual would qualify to claim the OETC since he only worked 9.09% (10 divided by 110) of his time in Canada during the qualifying period. Accordingly, where the individual provided consulting services in Canada for his employer, whether or not he received additional income for such services, the employee would continue to qualify for the OETC provided no more than 10% of his time during the qualifying period was spent working for his employer in Canada as calculated above.
If the individual had worked for a second employer during the vacation period, it would be a question of fact whether the individual would continue to be employed by his former employer and if he is, the 10% test would still be applicable.
Where the individual provides incidental consulting services, as a proprietor or partner of a non-incorporated business, for persons other than his employer or persons associated with his employer it would be a question of fact whether that individual continues to be employed by his former employer during the vacation period and therefore eligible to claim the OETC.
We trust these comments are adequate for your purposes.
Reorganizations and Foreign Division
Legislative and Intergovernmental
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