20 August 1990 Income Tax Severed Letter AC59819 - Overseas Teaching Assignments

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.

19(1)                                        M.P. Sarazin
                                             (613) 957-2125

Dear Sir:

We are writing in response to your letter dated March 7, 1990 in
which you requested technical interpretations concerning the tax
treatment of      24(1)       on overseas teaching assignments.
Relevant Facts The relevant facts for a typical situation may be
summarized as follows:

1.

2.

3.                   24(1)

4.

24(1)

Residence

24(1)

It is a question of fact which can only be determined following a review of all relevant facts of a given situation whether an individual would be considered resident in Canada for income tax purposes.

The Department's position concerning the determinationof an
individual's residence status for income tax purposes is explained
in Interpretation Bulletin 
IT-221R2
.  The facts outlined above
would tend, in our view, to          24(1)   Moving Expenses 24(1)
You are of the opinion that the moving expenses would not be
deductible under subsection 62(1) of the Act.  Your opinion is
based upon the fact that the employment and move concern a foreign
country therefore not satisfying the conditions set forth within
subsection 62(1) of the Act.  You are also of the opinion that the
payment of relocation costs by the foreign employer will constitute
a taxable benefit pursuant to paragraphs 6(1) (a) and (b) of the
Act.

We are in agreement with your position on the non-deductibility of moving expenses under subsection 62(1) of the Act. With regards to the reimbursement of relocation costs by an employer, the Department's general position is stated in paragraph 35 of interpretation Bulletin IT-470R wherein, it states, "where an employer reimburses an employee for the expenses incurred by the matter in moving the employee and the employee's family and household effects either ... or because of having accepted employment at a place other than where the former home was located, this reimbursement is not considered as conferring a taxable benefit on the employee".

Government Grants

24(1)

We regret that we are unable to provide a definitive opinion in
respect of the classification of the payment from the   24(1) as we
have not been provided with sufficient information.  Any meaningful
comments could only be provided following a review of all of the
details concerning the program, including any agreements to be
signed by the    24(1)    However, Interpretation Bulletin 
IT-75R2
titled "Scholarships, Fellowships, Bursaries, Prizes and Research
Grants" and the Special Release there to may provide you with the
information that you require regarding the classification of the
payments.

Foreign Income Tax Credits

The 24(1) may be required to pay income taxes on the employment income earned in the foreign country. You are of the opinion that the 24(1) would be eligible to deduct a foreign tax credit in the calculation of income taxes payable under section 126 of the Act or the foreign tax paid may be deducted in the calculation of income under subsection 20(12) of the Act.

We are in agreement with your position on the    24(1)  
eligibility to claim a foreign tax credit in computing his or her
tax otherwise payable for the year under Part I of the Act pursuant
to subsection 126(1) of the Act.  In regards to the eligibility for
a deduction under subsection 20(12) of the Act, it is our view that
the     24(1)    would not be eligible for such a deduction as
stated in paragraph 9 of Interpretation Bulletin 
IT-506
 wherein,
it states "Non-business-income taxes paid in respect of employment
income are not deductible under subsection 20(12) since subsection
8(2) restricts employment income deductions to those allowed under
section 8".

24(1)

It is your view that the fees earned under such a contract
constitute self-employment business income rather than employment
income and, as such, expenses related directly to the fees earned
would be deductible in the computation of net income for tax
purposes.  If the income qualifies as self-employment income then
the provisions of section 122.3 of the Act would not apply to
reduce the     24(1)    income taxes.

In order to determine whether the fees earned under a contract
would constitute self-employment or employment income, it is
essential to review all of the facts in order to categorize the
fees for income tax purposes.  We regret that we cannot provide you
with any meaningful comments without a review of all of the
relevant facts.  In any case, the     24(1)    would not qualify
for the deduction from income taxes pursuant to section 122.3 of
the Act because the    24(1)     would not be carrying on business
or undertaking contracts with respect to one of the activities
described in clauses 122.3(1)(b)(A), (B) or (C) in a foreign
country therefore not satisfying the conditions set forth within
paragraph 122.3(1)(b) of the Act.

Travelling Allowances

24(1)

It is your view that the travel allowance would be exempt from tax under subparagraph 6(1)(b)(vii) of the Act.

In our opinion the allowance for travelling expenses would not
qualify for exemption under subparagraph 6(1)(b)(vii) of the
Actsince the allowance must be paid for travel in the performance
of the duties of his office or employment.  Travel expenses
incurred in connection with the       24(1)      would, in our
view, not satisfy this condition.

Other Issues

Our responses to your queries have not taken into account the effects of any tax treaty that may exist between Canada and the particular foreign country in question. The provisions of any treaty would have to be reviewed in order to determine their effect on our responses to your various queries. Our general comments herein are provided in accordance with the practice referred to in paragraph 24 of Information Circular 70-6R.

Yours truly,

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