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.
SUBPARAGRAPH 2(a) OF ARTICLE XV OF THE CANADA-UNITED STATES INCOME TAX CONVENTION, 1980 (THE "CONVENTION") - DEPENDENT PERSONAL SERVICES
Subparagraph 2(a) of Article XV of the Convention provides for an exemption on remuneration "exercised in a calender year" that does not exceed $10,000. Generally, remuneration is taxable on a cash basis under both countries' domestic laws. However, by reading the phrase "exercises in a calender year", it appears that the threshold of $10,000 must be calculated on an accrual basis for every calender year. The questions are:
1. What is the interpretation given of the phrase "derived by a non-resident in respect of an employment exercised in a calender year"?
2. Should an accrual basis be used in calculating the $10,000 threshold to determine the taxability in a given country, as opposed to the cash basis?
3. If the answer to question 2 is yes, would an individual who receives less than $10,000 in each of two taxation years with regards to employment exercised in only one calender year, report the income to the country in which the employment income was exercised in only one calender year, report the income to the country in which the employment income was exercised in each of the two taxation years, if the total of the two years' receipts exceed $10,000?
REVENUE CANADA'S POSITION
Subparagraph 2(a) of Article XV of the Convention exempts a resident of one Contracting State from income tax in the other Contracting State on remuneration derived in respect of an employment exercised in a calendar year in the other contracting state if such remuneration does not exceed $10,000. In order to determine whether this exemption is available it is thus necessary to determine the amount of the remuneration derived "in respect of an employment exercised in a calendar year, "irrespective of when such remuneration derived by a taxpayer in respect of a calender year is in excess of $10,000, the exemption under subparagraph 2(a) of Article XV will not be available notwithstanding that the amount of such remuneration actually received by the taxpayer in any calendar year is less than $10,000.
Prepared by: G. Arsenault September 6, 1990
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