6 July 1989 Income Tax Severed Letter AC58087 - Tax Deduction for Employment Outside Canada - Architectural Service Considered Qualified Activity

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.

5-8087
                                             S. Leung
                                             613-957-2116
                      19(1)

July 6, 1989

Dear Sirs:

Re: Section 122.3 of the Income Tax Act (the "Act")

This is in reply to your letter of May 9, 1989 in which you requested a technical interpretation with respect to section 122.3 of the Act. Specifically, you requested the Department's views as to whether the field of architecture is qualified activity and whether an employer would be considered to be carrying on a business in a foreign country to which an employee was sent to perform duties in connection with a contract under which the employer provided architectural services to a construction company resident in that country.

In your view, the field of architecture is part of the broader faculty of engineering and since engineering is a qualified activity by virtue of clause 122.3(1)(b)(i)(B) of the Act, architectural services would also be a qualified activity. You also feel that it is not necessary for an employer to have a permanent establishment in a foreign country to be considered to be carrying on a business in that country. We cannot agree with your view that the field of architecture is included as part of the field of engineering for purpose of section 122.3 of the Act. Based on our review of the various dictionary definitions of these terms it is evident that the term "architecture" can be distinguished from that of engineering, for example, the New Columbia Encyclopedia defines architecture as the "art of building in which human requirements and construction materials are related so as to furnish a practical and aesthetic solution, thus differing from the pure utility of engineering construction". Also, in ordinary, everyday usage one would not normally think of the term "engineering" as including architecture.

It is, however, the Department's view that architectural services may generally be considered to be "with respect to ... any construction ... activity" for purposes of clause 122.3(1)(b)(i)(A) of the Act where such services relate to the construction of a building or similar structure.

Whether an employer carries on a business in a foreign country is a question of fact. We would refer you to paragraph 11 of Interpretation Bulletin IT-497R for the Department's comments on this subject matter. Generally, we agree that it is not necessary for an employer to have a permanent establishment in a foreign country before he can be considered to be carrying on a business in that country.

The foregoing comments are not rulings and in accordance with the guidelines explained in Information Circular 70-6R, are not binding on the Department.

Yours truly,

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch