29 March 1995 External T.I. 9507515 - CDN RESIDENT WORKING IN CHILE

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.

		950751
XXXXXXXXXX	S. Leung

March 29, 1995

Dear XXXXXXXXXX:

Re: Personal Income Tax

We are writing in reply to your letter of February 26, 1995 in which you requested our response to several questions you raised in your letter with respect to the preparation of your 1994 income tax return.

XXXXXXXXXX

The situation outlined in your letter relates to an actual situation. Accordingly, you should consult the Toronto District Taxation Office with respect to your income tax inquiries and liabilities. Their general inquiries telephone number is (416) 869-1500. However, we can offer the following general comments.

From the above limited information provided in your letter, it appears that you are a factual resident of Canada for Canadian income tax purposes. As a resident of Canada, your world-wide income will be subject to Canadian income tax. It also appears that you are still a resident of the Province of Ontario where you have a permanent home and where your wife and children reside.

You are not eligible for an Overseas Employment Tax Credit ("OETC") in Canada because, among other things, your employer is not a resident of Canada or a corporation that is a foreign affiliate of a person resident in Canada. However, a foreign tax credit is available for income or profit taxes that you paid to the Chilean government against your Canadian income tax payable. In this regard we enclose Interpretation Bulletin IT-270R2 "Foreign Tax Credit" for your reference. Your pension contributions in Chile would not be considered income or profit taxes of Chile for purposes of the Canadian foreign tax credit rules. In addition, such pension contributions are not deductible in the computation of income for Canadian tax purposes.

Since your employment is not exercised in Canada, you are not required or allowed to make contributions to Canada Pension Plan or Unemployment Insurance.

Your contributions to the RRSP are deductible subject to the normal rules for RRSP deduction. It should be noted that in order for the RRSP contribution to be deductible for 1994, such contribution must be made in 1994 or within the first 60 days of 1995. Unemployment Insurance benefits do not form part of "earned income" for RRSP purposes. Consequently, they should not be included in earned income when computing RRSP deduction limit. It should also be noted that RRSP deduction limit is restricted to, among other things, 18% of earned income of the immediately preceding year, that is, your 1994 deduction limit is based on your 1993 earned income computation.

The Bank of Canada or the central bank of Chile usually provides daily, monthly, and annual exchange rates between Canada and Chile. You may call the central bank of Chile or the Bank of Canada for such exchange rates. The general inquiry telephone number for the Bank of Canada is (613) 782-7201. For example, the annual exchange rate for 1994 according to the Bank of Canada is 0.003084. Since your employment commenced on May, 1994, an average exchange rate from May, 1994 to December, 1994 will be more appropriate than the annual rate for the income you earned in Chile during that period.

Depending on the terms of your contract of employment and the particular facts of your situation, pursuant to subsection 6(6) of the Income Tax Act you may not need to include in the computation of income from employment the value of your board and lodging in Chile and certain transportation provided by your employer. Please refer to the attached Interpretation Bulletin IT-91R3 for more details.

We trust you will find the above to be of assistance.

Yours truly,

for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch