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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Taxability of Payments Received by CIDA Cooperants. Comparable to payments under the Foreign Service Directives - Reimbursements and Allowances.
Position:
Payments reviewed non-taxable pursuant to departmental in effect at the time when the payments were received.
Reasons:
Departmental position.
January 3, 1997
Calgary Tax Services Office HEADQUARTERS
International Tax Services D. Zion
(613) 957-8953
Attention: L. Randall
XXXXXXXXXX
CIDA Allowances
This is in reply to your memorandum of March 4, 1996, and our subsequent telephone conversations (Zion/Randall), concerning the taxability of allowances received by XXXXXXXXXX while employed in a CIDA sponsored program. We apologize for the delay in our response.
As we understand the situation XXXXXXXXXX.
Although persons who are not resident in Canada are generally taxable in Canada on only their Canadian-source income, section 250 of the Income Tax Act (the "Act") deems certain persons to be resident in Canada with the result that these individuals are subject to tax in Canada on their world income. Paragraph 250(1)(d) of the Act deems a person to be resident in Canada throughout a taxation year if he performed services outside of Canada "under a prescribed international development assistance program of the Government of Canada" and if he also "was resident in Canada at any time in the 3 month period preceding the day on which such services commenced." Section 3400 of the Income Tax Regulations provides that each "international development assistance program of the Canadian International Development Agency" that is "financed with funds (other than loan assistance funds) provided under External Affairs Vote 30a, Appropriation Act No. 3, 1977-78, or another vote providing for such financing," is "prescribed as an international development assistance program of the Government of Canada." Accordingly, based on the information provided, we are in agreement with your view that XXXXXXXXXX is a deemed resident pursuant to paragraph 250(1)(d) of the Act during the time he participates in the CIDA funded program and thus subject to tax in Canada on his world income.
As you are aware, allowances received by an employee for personal or living expenses are generally taxable under paragraph 6(1)(b) of theActunless specifically exempted. Subparagraph 6(1)(b)(iii) of the Act exempts representation or other special allowances received by individuals described in paragraph 250(1)(d) of the Act serving abroad. A "representation allowance" in the context of subparagraph 6(1)(b)(iii) of the Act, is an allowance paid to a worker having to work outside the country and is intended to lessen the inconveniences arising out of having to move abroad, be subject to different living conditions and, when applicable, having to face a higher cost of living. Amounts generally qualify as "special allowances" when an employee is transferred or assigned outside of Canada and, as a result, incurs additional expenses. It is an allowance designed to compensate, not reimburse a loss or additional expense arising out of the employment outside Canada. Provided that the amounts paid are allowances and not reimbursements, that the payments are clearly linked to additional "living expenses," and the conditions of subparagraph 6(1)(b)(iii) of the Act are otherwise met, these amounts are excluded from income.
Due to the time period (XXXXXXXXXX) in which XXXXXXXXXX received the amounts outlined in item 4 of the conclusion to the December 15, 1995, letter from XXXXXXXXXX, the tax status of certain amounts paid to or on behalf of XXXXXXXXXX pursuant to Part II section 9 of the TARs has been considered in connection with our review of the tax treatment of comparable amounts under the Treasury Board Foreign Service Directives. Consequently, those particular payments would not be taxable. It is also our view that representation or other special allowance payments made after the noted time period would not be taxable if the conditions in subparagraph 6(1)(b)(iii) are met in the manner outlined above.
As a final note, XXXXXXXXXX has advised you that employees who serve overseas as international advisors on projects which are not a prescribed development assistance program of the Government of Canada are entitled to reimbursements or allowances similar in nature to those paid to XXXXXXXXXX while employed in this CIDA funded project pursuant to company compensation policy. These benefits or allowances can be distinguished from those provided under the CIDA TARs. Subparagraph 6(1)(b)(iii) of the Act only exempts from tax representation or other special allowances received in respect of a period of absence from Canada, if received by persons deemed resident of Canada by virtue of paragraph 250(1)(b), (c), (d) or (d.1). Accordingly, the value of any benefit given to the international advisors noted herein, including an allowance for board, lodging, cost of living differential, reimbursement of education costs or personal travel, is taxable and should be reported on a T4 information slip (unless the exception contained in subsection 6(6) is applicable).
We trust that our comments will be of assistance.
John F. Oulton
Section Chief
Business, Property & Personal Section
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1997
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1997