8 February 1996 External T.I. 9508415 - U.S. SOCIAL SECURITY, LOCALLY ENGAGED DUAL CITZEN (7205)

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.

Principal Issues:

Whether a dual Canadian/U.S. citizen who is hired locally in the U.S. to work for the Canadian Embassy in Washington is covered under the Canada Pension Plan ("CPP") or the U.S. Social Security legislation.

Position:

T/P is covered under U.S. Social Security legislation

Reasons:

	This dual citizen is not covered under the CPP but is 	covered under U.S. Social Security as a self-employed 	individual.

Canadian Embassy
501 Pennsylvania Ave., N.W.
Washington, D.C.  20001			950841
G. Middleton
(613) 957-2122
Attention:  Carol-Lynn Weimer

February 8, 1996

Dear Sirs:

Re: Locally Engaged Dual Canadian/U.S. Citizens

This is in reply to your letters of March 21 and 23 in which you asked us whether a dual Canadian/U.S. citizen who is hired locally in the U.S. to work for the Canadian Embassy in Washington is covered under the Canada Pension Plan ("CPP") or the U.S. Social Security legislation. We apologize for the delay in our response.

Paragraph 4 of Article V of the 1984 "Social Security Agreement between the United States and Canada" (the "Agreement") is the relevant provision which deals with persons employed by the Canadian Embassy in Washington. Paragraphs 6 and 7 of Article V of the Agreement, which you referred to in your letter, do not apply to a person employed by the Canadian Embassy since paragraph 4(a) of Article V states that no other provision in Article V applies to such a person other than the exceptions set out in paragraph 4(b) of Article V of the Agreement.

The exceptions set out in paragraph 4(b) of Article V of the Agreement only apply to a person who has social security coverage under the laws of both Canada and the U.S.

With respect to the dual Canadian/U.S. citizen described above, it is our understanding that:

• The dual citizen would be covered under the U.S. Social Security laws as a self-employed individual and would be required to pay social security contributions on the salary earned at the Canadian Embassy as though the salary was self-employment income.
• The dual citizen would not be covered under the CPP where the person was considered to be "an employee engaged locally outside Canada". The meaning of that expression is found in subsection 16(3) of Part III of the CPP Regulations and it means "an employee who is engaged outside Canada for the performance of services outside Canada."

Since this dual citizen does not have social security coverage under the laws of both Canada and the U.S., the provisions of paragraph 4(b) of Article V of the Agreement do not apply. The net result is that such a locally engaged dual citizen would be covered under the U.S. Social Security legislation as a self-employed individual.

In the case where a dual Canadian/U.S. citizen is sent by the Canadian Government to work at the Canadian Embassy in Washington, the person's employment would be considered to be pensionable employment under subsection 16(1) of Part III of the CPP Regulations. Since this person is a U.S. citizen, it is our understanding that he would also be covered under the U.S. Social Security laws. If such a person has social security coverage under the laws of both Canada and the U.S., he would only be subject to the laws of Canada in respect of that employment (i.e. CPP coverage) by virtue of subparagraph 4(b)(i) of Article V of the Agreement.

If you would like to confirm the views we expressed above or if you should require any additional information regarding coverage under the U.S. Social Security legislation, we suggest you write to the Social Security Administration, Office of International Policy, P.O. Box 17741, Baltimore, M.D. 21235.

We trust our comments will be of assistance to you.

Yours truly,

K. Major
Section Chief
Foreign Section
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

Issue Sheet File #950841

Issue

Whether a dual Canadian/U.S. citizen who is hired locally in the U.S. to work for the Canadian Embassy in Washington is covered under the Canada Pension Plan ("CPP") or U.S. Social Security.

Position

-Paragraph 4 of Article V of the Agreement is the relevant provision which deals with persons employed by the Canadian Embassy. Paragraphs 6 and 7 of Article V of the Agreement do not apply since paragraph 4(a) of Article V states that no other provision in Article V applies to such a person other than the exceptions set out in paragraph 4(b) of Article V of the Agreement.

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all U.S. citizens, including dual citizens such as the locally engaged dual Canadian/U.S. citizen described above, would normally be covered under the U.S. Social Security laws before consideration is given to a bilateral social security agreement.

-Therefore, the dual Canadian/U.S. citizen who is found to be hired locally in the U.S. would not be covered under the CPP pursuant to paragraph 16(1)(c) of Part III of the CPP Regulations. (Note: It is doubtful that paragraph 16(1)(f) could apply in any circumstance to such a person because paragraph 4(b)(ii) of Article V of the Agreement would stipulate that the person would only be covered under the U.S. social security laws where a person is covered under the laws of both Canada and the U.S.)

-Since this dual citizen does not have social security coverage under the laws of both Canada and the U.S., the provisions of paragraph 4(b) of Article V of the Agreement do not apply. The net result is that such a dual Canadian/U.S. citizen who is found to be hired locally in the U.S. would be covered under the U.S. Social Security laws as a self-employed individual.

-In other situations, a dual Canadian/U.S. citizen may be sent by the Canadian Government to work at the Canadian Embassy in Washington and that person's employment would be pensionable employment under subsection 16(1) of Part III of the CPP Regulations. Since the person is a U.S. citizen, it is our understanding that he would also be covered under the U.S. Social Security laws. Although such a person would have social security coverage under the laws of both Canada and the U.S., the person would only be subject to the laws of Canada in respect of that employment (i.e. CPP coverage) by virtue of subparagraph 4(b)(i) of Article V of the Agreement.

_For details of a case which involves a Canadian citizen who is not a U.S. citizen and who was locally engaged in the U.S. while living in the U.S., refer to file #951770. Under special circumstances as described in that file, a person may be able to get coverage under the CPP Regulations.