1 May 1996 External T.I. 9614035 - EMPLOYEES OF INTERNATIONAL ORGANIZATIONS (XXXXXXXXXX)

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 employees of the XXXXXXXXXX have any special tax status in Canada?

Position:

No.

Reasons:

The XXXXXXXXXX is neither a "prescribed international organization" for purposes of paragraph 110(1)(f) of the Act nor is it covered by the Foreign Missions & International Organizations Act.

Department of Foreign Affairs
and International Trade
Canadian Embassy 961403
Laurenzerberg 2 Jim Wilson
1010 Vienna (613) 957-2123
Austria

Attention: Thomas Marr
Commercial Counsellor

May 1, 1996

Dear Sirs:

Re: XXXXXXXXXX

We are writing in response to your facsimile of February 12, 1996 wherein you requested our assistance with respect to the Canadian tax implications to a Canadian citizen (the "individual") working for the XXXXXXXXXX in Austria. As we understand, the individual has asked for your assistance in determining whether the XXXXXXXXXX an international organization with its headquarters near XXXXXXXXXX has any special recognition under the Income Tax Act (the "Act") or any other Canadian legislation that would affect the individual's tax status in Canada.

Based on our understanding that the XXXXXXXXXX is not part of the United Nations, there is no special tax status in Canada, that we are aware of, for employees of the XXXXXXXXXX There are tax exemptions available in Canada to employees of certain international organizations, however, the XXXXXXXXXX does not appear to be one of them. We have summarized these special rules at the end of the letter under the headings "Prescribed International Organizations" and "Foreign Missions & International Organizations Act".

We do not have sufficient information to determine the tax implications in Canada on the remuneration that the individual may receive from the XXXXXXXXXX In this regard, we would require the individual's Canadian residence status while absent from Canada (see Form NR73 procedures discussed below) and his tax status in Austria while present in that country.

We can, however, offer the following general comments which may be of some assistance to you.

Determination of Residence

The Canadian tax implications on such remuneration will depend firstly on the determination of his Canadian residence status while working in Austria. During the period of absence from Canada the individual would be considered a resident of Canada if he did not sever his residential ties with Canada (ie. remained factually resident in Canada) or if he is a deemed resident of Canada. It is a question of fact whether the individual would maintain factual residence status while working outside Canada even for terms exceeding 2 years. We have enclosed Interpretation Bulletin IT-221R2 which deals with determination of an individual's residence status. If the individual has not already done so, he should complete form NR73 (copy attached) and send it to the address provided on the top of the form. The International Taxation Office will then make a determination of his Canadian residence status for the period he is absent from Canada. If the individual has any questions in this regard, a phone number has been provided on the form.

A deemed resident of Canada will include an individual who was, at any time in the year, an officer or servant of Canada and was resident in Canada immediately prior to his appointment or employment by Canada.

Resident of Canada for Canadian Tax Purposes

Where the individual is a resident of Canada, he would be taxable in Canada on his world income ("taxable income"), subject to the provisions of the Canada-Austria Income Tax Convention (the "Treaty") (copy enclosed). Due to the nature of his stay in Austria, he may be considered a resident of both Canada and Austria for purposes of the Treaty ("dual residence"). To be considered a resident of Austria, it would generally be required that the individual be subject to tax in Austria on his world income. He should contact the Austrian tax authorities to determine his residence status while present in that country and performing his duties with the XXXXXXXXXX Where he is considered a resident of both countries, Article IV of the Treaty provides "tie-breaker rules" that will determine, for purpose of interpreting the Treaty, in which country he will be considered resident.

Pursuant to paragraph 3 of Article XXVII of the Treaty, the Treaty does not apply to an official of an international organization who is present in Austria and is not liable in Austria to the same obligations in relation to tax on their total world income as are residents of Austria. Again, the Austrian tax authorities could assist the individual in resolving this issue.

In the event the Treaty does apply and we have a dual residence issue, it is difficult for us to determine the residence status of a particular individual for purpose of the Treaty without having all specific facts (see introductory comments). However, the first tie-breaker rule will establish him as a resident of the country in which he has a permanent home available to him. Any form of home may be taken into account (house or apartment belonging to or rented by him). Where he has a permanent home available to him in both countries or in neither country, he will be considered a resident of the country with which his personal and economic relations are closer (centre of vital interests). However, it should be noted that a determination of residency for purposes of the Treaty will not change his residence status for Canadian taxation purposes. Should he be considered resident of Austria for purposes of the Treaty he is still required to report his world income for Canadian tax purposes but will be allowed to claim certain deductions from income or the resulting tax payable as provided in the Treaty.

1.Where, by virtue of paragraph 3 of Article XXVII of the Treaty, the Treaty does not apply to this individual, any remuneration earned by the individual from the XXXXXXXXXX will be subject to tax in Canada.

2.Where the Treaty does apply and the individual is considered a resident of Canada for purposes of the Treaty, Canada's right to tax will be maintained and as a consequence any remuneration earned by the individual from the XXXXXXXXXX will be subject to tax in Canada.

In both situations 1 and 2 above, Canada would have to provide a foreign tax credit for any income taxes paid to the Austrian government and, in the event the XXXXXXXXXX withheld an internal levy, a tax credit would also be provided by Canada in accordance with subsection 126(3) of the Act.

3.Where the Treaty does apply and the individual is considered a resident of Austria for purposes of the Treaty, Canada's right to tax any remuneration earned by the individual with respect to an employment exercised in Austria would be denied pursuant to paragraph 1 of Article XV of the Treaty. In other words, such remuneration would be exempt from Canadian tax.

Non-Resident of Canada for Canadian Tax Purposes

Where the individual is a non-resident of Canada, he would not be subject to Canadian tax with respect to any remuneration received from the XXXXXXXXXX for services performed in Austria.

Prescribed International Organizations

Employees of a "prescribed international organization" are entitled to a deduction under paragraph 110(1)(f) of the Act in computing taxable income equal to their income from employment with that particular organization. To date, the organizations that have been prescribed under section 8900 of the Income Tax Regulations are the United Nations, and any specialized agency that is brought into relationship with the United Nations in accordance with Article 63 of the Charter of the United Nations, the International Air Transport Association and the International Society of Aeronautical Telecommunications.

The "United Nations" would include its Regional Commissions and other United Nations bodies. Article 63 of the Charter reads as follows:

1.The Economic and Social Council may enter into agreements with any of the agencies referred to in Article 57, defining the terms on which the agency concerned shall be brought into relationship with the United Nations. Such agreements shall be subject to approval by the General Assembly.

2.It may co-ordinate the activities of the specialized agencies through consultation with and recommendations to such agencies and through recommendations to the General Assembly and to the Members of the United Nations.

Article 57 of the Charter of the United Nations reads as follows:

1.The various specialized agencies, established by intergovernmental agreement and having wide international responsibilities, as defined in their basic instruments, in economic, social, cultural, educational, health, and related fields, shall be brought into relationship with the United Nations in accordance with the provisions of Article 63.

2.Such agencies thus brought into relationship with the United Nations are hereinafter referred to as specialized agencies.

The Charter of the United Nations has a listing (including descriptions, etc.) of "Specialized Agencies Within the UN System". The following is a list of these agencies:

Food and Agriculture Organization - FAO
General Agreement on Tariffs and Trade - GATT
International Atomic Energy Agency - IAEA
International Bank for Reconstruction & Development- IBRD (World Bank)
International Civil Aviation Organization - ICAO
International Development Association - IDA
International Finance Corporation - IFC
International Fund for Agricultural Development - IFAD
International Labour Organization - ILO
International Maritime Organization - IMO
International Monetary Fund - IMF
International Telecommunications Union - ITU
United Nations Educational, Scientific & Cultural Organization - UNESCO (included are International Institute for Educational Planning, International Bureau of Education and Intergovernmental Committee for Physical Education and Sport)
United Nations Industrial Development Organization - UNIDO
Universal Postal Union - UPU
World Health Organization - WHO
World Intellectual Property Organization - WIPO
World Meteorological Organization - WMO

Foreign Missions & International Organizations Act ("FMIOA")

The FMIOA, among other things, exempts the international organizations described therein from Canadian tax and exempts certain of its "officials" from Canadian tax on the remuneration earned therefrom. For example, pursuant to paragraph 5(1)(g) of the FMIOA, the Governor in Council may, by order, provide that:

"such other officials of an international organization as may be designated by the Governor-in-Council shall, to the extent specified in the order, have the privileges and immunities set out in Section 18 of Article V of the Convention on the Privileges and Immunities of the United Nations"

Section 18 of Article V of the Convention on the Privileges and Immunities of the United Nations reads in part:

"Officials of the United Nations shall ....... be exempt from taxation on the salaries and emoluments paid to them by the United Nations"

To date, the Governor in Council has not, by order, recognized the XXXXXXXXXX for purposes of the FMIOA. Accordingly, the FMIOA does not apply to grant exemption from Canadian tax to any "officials" of the XXXXXXXXXX. However, for your information, had the XXXXXXXXXX been recognized for purposes of the FMIOA by order-in-council, such tax exemption would not apply to any Canadian citizen residing or ordinarily resident in Canada. Subsection 5(3) of the FMIOA is worded as follows:

"Nothing in any order made under subsection (1) exempts a Canadian citizen, residing or ordinarily resident in Canada, from liability for any taxes or duties imposed by any law in Canada."

Summary

We have enclosed a pamphlet entitled "Emigrants" which would be useful to the individual in the event he has severed his residential ties with Canada (i.e. he has become a non-resident of Canada). If the individual requires further assistance, please refer to the back of the pamphlet which provides the telephone numbers to call.

We apologize for the delay in responding to your facsimile. Due to the nature of your enquiry, it took some time for it to reach our Directorate. In the future, if you have any enquiries concerning international organizations and/or employees thereof, we would suggest you write to (or facsimile) our Directorate directly. Our facsimile number is (613) 957-2088.

We trust you will find the above comments of some assistance.

Yours truly,

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