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.
Revenue Canada Roundtable
Canadian Petroleum Tax Society Conference
June 7, 1995
Question 3 Overseas Employment Tax Credit -- Secondment
Where a Canadian-based employer has seconded Canadian resident employees to foreign corporations (e.g. parent or sister corporations) which are carrying on qualifying activities as described in subparagraph 122.3(1)(b)(i) of the Income Tax Act outside Canada, is the Canadian-based employer "carrying on business outside Canada" with respect to qualifying activities when the secondment is made on a cost recovery basis? Does the answer change if a profit is produced by the secondment?
Department's Position
As indicated in paragraph 11 of Interpretation Bulletin IT-497R2, it is always a question of fact whether or not a specified employer is carrying on business outside Canada. All the relevant facts and circumstances of a particular situation have to be considered and no one fact would be conclusive by itself in making such determination. Where an employee of a corporation is seconded to another corporation, it is also a question of fact whether the individual who is seconded to the other corporation is the employee of the first-mentioned corporation or the other corporation. It is our view that the employer is not necessarily the person who pays the salaries if that person is not the person to whom the individual reports on a daily basis. Accordingly, where an individual remains on the payroll of one company and works for another company it is necessary to ascertain with which company he or she has an employer-employee relationship for purposes of determining whether or not he or she is employed with a specified employer.
With regard to the above example, if in fact the Canadian resident individual is an employee of a specified employer and not the foreign corporation and if the specified employer has a contract under which it is carrying on business outside Canada with respect to qualifying activities, it should not matter whether the Canadian company charges amounts due to it under the contract to the foreign corporation as management fees or otherwise. However, where the specified employer is carrying on business, normally it would be expected that such a business is carried on with a view to profit.
Simon Leung
Date: May 5, 1995
File: 5-951167
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