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 the Asian Development Bank is a prescribed entity for purposes of subparagraph 110(1)(f)(iii) of the Act.
Position: No.
Reasons:
It is not a U.N. Agency.
971555
XXXXXXXXXX Jim Wilson
(613) 957-2123
June 13, 1997
Dear Sir:
Re: Employees of the Asian Development Bank ("ADB")
This is in reply to your facsimile dated June 11, 1997 in which you asked for our comments concerning the status of the ADB for purposes of subparagraph 110(1)(f)(iii) of the Income Tax Act and section 8900 of the Income Tax Regulations.
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
In summary, the ADB is not an entity prescribed for purposes of subparagraph 110(1)(f)(iii) of the Act.
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. The Governor in Council has, by order, recognized the ADB for purposes of the FMIOA. However, pursuant to subsection 5(3) of the FMIOA, the exemption from Canadian tax does not apply to a Canadian citizen residing or ordinarily resident in Canada.
The Canadian tax implications on such remuneration will depend firstly on the determination of the individual's Canadian residence status while working outside Canada for the ADB. 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.
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.
Where the individual is a resident of Canada, he would be taxable in Canada on his world income, including his remuneration from the ADB, subject to the provisions of an income tax convention. In the event the individual was subject to an internal levy on his remuneration paid to him by the ADB, he would be entitled to receive a tax credit against his federal tax payable pursuant to subsection 126(3) of the Act.
Should you require our assistance with respect to the application of a particular income tax convention, where for example the individual is performing services for the ADB in a country where Canada has entered into a bilateral income tax convention, we would require full details concerning the individual's residency status in both Canada and the foreign country.
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
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