20 December 2010 Internal T.I. 2010-0371291I7 - Prescribed International Organization

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.

Principal Issues: 1. Whether the African Development Bank is a prescribed international organization such that its employees are entitled to a deduction under paragraph 110(1)(f)(iii). 2. If not, is their income exempt under the Foreign Missions & International Organizations Act?

Position: 1. No. 2. Question of Fact

Reasons: 1. Not one of the specialized agencies prescribed in paragraph 8900(1)(b) of the Regulations. 2. Only if the employee is not a Canadian citizen residing or ordinarily resident in Canada.

							December 20, 2010

Assessment and Benefit Services Branch	HEADQUARTERS
							Income Tax Rulings
Attention:  Chris Pandya			  Directorate
							Shelley Lewis
							(613) 957-2118

							2010-037129

Prescribed International Organization

This is in response to your e-mail of June 17, 2010 in which you requested our comments regarding the eligibility of a taxpayer for a deduction under paragraph 110(1)(f) of the Income Tax Act (the "Act"). In particular, you asked us if the African Development Bank ("ADB") is a "prescribed international organization" for the purposes of subparagraph 110(1)(f)(iii) of the Act.

Employees of a "prescribed international organization" are entitled to a deduction under paragraph 110(1)(f)(iii) 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 subsection 8900(1) 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 "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 United Nations Website at http://www.un.org/en/aboutun/structure/index.shtml
provides the following list of Specialized Agencies:

• Food and Agriculture Organization of the United Nations (FAO)
• International Civil Aviation Organization (ICAO)
• International Fund for Agricultural Development (IFAD)
• International Labour Organization (ILO)
• International Maritime Organization (IMO)
• International Monetary Fund (IMF)
• International Telecommunication Union (ITU)
• United Nations Educational, Scientific and Cultural Organization (UNESCO)
• United Nations Industrial Development Organization (UNIDO)
• Universal Postal Union (UPU)
• World Bank Group:
  • International Bank for Reconstruction and Development (IBRD)
  • International Centre for Settlement of Investment Disputes (ICSID)
  • International Development Association (IDA)
  • International Finance Corporation (IFC)
  • Multilateral Investment Guarantee Agency (MIGA)
• World Health Organization (WHO)
• World Intellectual Property Organization (WIPO)
• World Meteorological Organization (WMO)
• World Tourism Organization

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")

Pursuant to paragraph 81(1)(a) of the Act any amount that is declared to be exempt from income tax by any other enactment of Parliament, (other than an amount received or receivable by an individual that is exempt by virtue of a provision contained in a tax convention or agreement with another country that has the force of law in Canada) shall not be included in computing the income of a taxpayer. This provision is relevant in the case of foreign missions because the Governor in Council may, pursuant to the provisions of the FMIOA, exempt certain income of an international organization and its "officials" from Canadian tax. The Governor in Council has recognized the ADB for purposes of the FMIOA. The Governor in Council's order SOR/84-360 (i.e. the African Development Bank Privileges and Immunities Order "ADBPIO") relates to the ADB. Subparagraph 3(3) of the ADBPIO, subject to Article V of the Convention for officials of the United Nations, incorporates the exemption from taxation of salaries and emoluments paid to officials of the ADB provided for in article 57 of the Agreement Establishing the African Development Bank. However, paragraph 4 of the ADBPIO restricts the exemption from Canadian tax so that it does not apply to an official of ADB who is a Canadian citizen, residing or ordinarily resident in Canada.

We trust these comments are of assistance.

Yours truly,

Olli Laurikainen
for Director
International and Trusts Division
Income Tax Rulings Directorate