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.
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Dear Sirs:
This is in reply to your letter of April 8, 1993 in which you requested our position on the meaning of "outside Canada" for the purpose of section 122.3 of the Income Tax Act (the "Act").
Section 255 of the Act reads:
"....."Canada" is hereby declared to include and to have always included
(a) the sea bed and subsoil of the submarine areas adjacent to the coasts of Canada in respect of which the Government of Canada or of a province grants a right, license or privilege to explore for, drill for or take any minerals, petroleum, natural gas or any related hydrocarbons; and (b) the seas and airspace above the submarine areas referred to in paragraph (a) in respect of any activities carried on in connection with the exploration for or exploitation of the minerals, petroleum, natural gas or hydrocarbons referred to in that paragraph."
The Income Tax Conventions Interpretation Act defines "Canada" to mean:
".....the territory of Canada, and includes
(a) every area beyond the territorial seas of Canada that, in accordance with international law and the laws of Canada, is an area in respect of which Canada may exercise rights with respect to the sea bed and subsoil and their natural resources, and
(b) the seas and airspace above every area described in paragraph (a);"
As you can see from these definitions, Canada is not limited to a specific number of miles offshore. In accordance with international law, the term "Canada" includes the areas within which Canada has the right to exercise its control with respect to offshore activities.
For example, provided Canada or a province has the right to grant permission for an employer to perform any of the activities outlined in paragraph 255(a) of the Act, the employer will be considered to carry on business in Canada whether it is 186 or 250 miles offshore. Accordingly, all rigs operating on the continental shelf off the east coast of Canada will be considered to be located in Canada and the employees working on such rigs will also be considered to perform their duties of employment in Canada for purposes of subsection 122.3(1) of the Act.
You may also wish to read the comments in paragraph 4 of Interpretation Bulletin IT-494 which discusses the meaning of the term "in Canada".
We trust the above comments will be helpful.
Yours truly,
for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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