13 October 1994 External T.I. 9402265 - OVERSEAS EMPLOYMENT TAX CREDIT

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.

Principales Questions:

qualify under 122.3 for a overseas employment tax credit

Position Adoptée:

an employer must carry on business in the other country with respect to a specified type of activities. the contract was a personal services agreement.

Raisons POUR POSITION ADOPTÉE:

voir ci-avant

XXXXXXXXXX		5-940226

Attention: XXXXXXXXXX

October 13, 1994,

Dear Sir:

Re: XXXXXXXXXX
Overseas Employment Tax Credit

This is in reply to your letter of January 3, 1994, wherein you requested our opinion on section 122.3 of the Income Tax Act (the "Act"). More specifically you asked whether your client, the employer, would be considered to carry on business with respect to a construction, installation or engineering activity for the purposes of division 122.3 (1)(b)(i)(B) of the Act. On February 16, 1994, you provided additional information as requested, namely a description of the installation activity, a project plan and a copy of the contracts between the Canadian employer, and the Dutch company. In summary you describe the following situation.

XXXXXXXXXX

COMMENTS

In your letters, you outlined what appears to be an actual fact situation related to transactions and events which have taken place. The review of such situations is generally the responsibility of the District Taxation Offices and it is our practice not to provide specific opinions on factual situations otherwise than in the context of advance income tax rulings in accordance with paragraph 21 of Information Circular 70-6R2. In any event, a request cannot be considered for a ruling when the transactions are completed. Nevertheless, we are prepared to provide the following comments which we hope will be of assistance to you.

A review of the documentation attached to your letter of February 16, 1994, revealed that the employees of the Canadian company have been involved in the following activities:

XXXXXXXXXX

Nevertheless, we cannot conclude that the employees in question could qualify for the OETC.

Section 122.3 of the Income Tax Act provides that where an individual is resident in Canada in a taxation year, and throughout any period of more than 6 consecutive months that commenced in the year or a previous year was employed by a person who was a specified employer and performed all or substantially all of his duties of employment outside Canada in connection with a contract under which the specified employer carried on a business outside Canada with respect to "any construction, installation, agricultural or engineering activity" as provided in clause 122.3(1)(b)(i)(B) of the Act, he will be eligible to claim the OETC.

It is generally our position that an employer must carry on business in the other country with respect to one of the specified types of activities. The contract between the Canadian company and the Dutch company is a personal services agreement whereby the Canadian company is providing the Dutch company with the services of XXXXXXXXXX. The business activities of the Canadian company are performed in Canada. We fail to see how the Canadian company could be considered to be carrying on business outside Canada in the circumstances.

As noted earlier however, the determination of whether an individual is entitled to claim the OETC is the responsibility of your District Taxation Office. You may wish to pursue the matter with them should you not be in agreement with our conclusions.

We hope these comments will be of assistance.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch