Docket: 2010-3554(CPP)
BETWEEN:
B2C INTELLIGENCE GROUP INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
____________________________________________________________________
Appeal heard on April 24, 2012, at Toronto,
Ontario.
Before: The Honourable Justice
Patrick Boyle
Appearances:
|
Agent for the Appellant:
|
Gil Gagea
|
|
|
|
|
Counsel for the Respondent:
|
Christopher M. Bartlett
|
____________________________________________________________________
JUDGMENT
The appeal made pursuant to subsection 28(1)
of the Canada Pension Plan is dismissed and the decision rendered by the
Minister of National Revenue on August 19, 2010 is confirmed in
accordance with the attached reasons for judgment.
Signed at Toronto, Ontario, this 8th day of June 2012.
"Patrick Boyle"
Citation: 2012 TCC 203
Date: 20120608
Docket: 2010-3554(CPP)
BETWEEN:
B2C INTELLIGENCE GROUP INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Boyle J.
[1]
B2C Intelligence Group
Inc. (“B2C”) has appealed from Canada Pension Plan (“CPP”)
assessments in respect of two of its employees for the period January 1, 2007
to December 31, 2009.
[2]
B2C is a Canadian
corporation wholly owned by the two employees in question,
Mr. Khalid Toma and his spouse Ms. Hedeel Salman. B2C
operated from the Mississauga home of Mr. Toma and his spouse.
Mr. Toma and his spouse are Canadian residents.
[3]
B2C is an acronym for
Business to Commerce. B2C runs a worldwide technology consulting firm. Many of
its customers are in the United Kingdom (“UK”) and in Europe. In providing
those services, in addition to Mr. Toma’s expertise, B2C has access to a
highly talented pool of information technology and computer professionals
located in India, Ukraine and Russia, who are available to work on its
contracts as subcontractors. Non‑Canadians are regularly used by B2C to
fulfill its foreign contracts. Ms. Salman’s work for B2C consists of
marketing and ensuring that requests for proposals are received, and that
proposals are properly submitted and presented. Her work for B2C also takes her
regularly outside Canada.
[4]
Two contracts between
B2C and a UK corporation were put in evidence. The UK counterparty was
subcontracting to B2C its commitments to arm’s‑length UK companies,
Vodafone UK and Cooperative Financial Services Bank. The evidence is that these
were representative contracts of how B2C conducts at least its non‑Canadian
business activities. It is clear from these contracts that B2C is in the
business of committing to provide professional services to its customers and
their underlying customers. While the contracts do specify which staff member
of B2C will be providing the services unless otherwise agreed (which in both
cases was Mr. Toma), it is entirely clear from the contracts that B2C was
committing to provide the specific contracted services using its professionals
and was not committing to provide the placement of its staff, employees or
subcontractors to fill a role for its customers, or its customers’ customers,
in the manner that a placement or employment agency would.
[5]
Pensionable employment
is defined in paragraph 6(1)(a) of the CPP as employment in
Canada that is not excepted employment.
[6]
Paragraph 6(2)(k)
of the CPP provides that excepted employment includes employment
excepted from pensionable employment by a regulation made under section 7.
Paragraph 7(1)(a) of the CPP provides for regulations to be
made to include as pensionable employment “any employment outside Canada or
partly outside Canada, being employment that would be pensionable employment if
it were in Canada”.
[7]
Part III of the CPP
Regulations is headed “Employment Included in or Excepted from Pensionable
Employment by Regulation.” Regulation 16 deals with employment outside
Canada. Regulation 16(1)(b) provides specifically that
“[p]ensionable employment includes employment outside Canada. . .
that would be pensionable employment if it were in Canada, if the employee
employed therein is resident in Canada and is paid at or from an establishment
in Canada of his employer.”
[8]
It is the Appellant’s
position that B2C’s employment of Mr. Toma and Ms. Salman was
employment outside Canada. It is not entirely clear to me that the two
employees were employed outside Canada merely because part of their services
rendered to their Canadian employer included travel to attend at foreign
clients and prospective clients. However, even if their employment was
employment outside Canada, it is clear and it is not disputed by the Appellant
that:
1)
Mr. Toma’s employment
and Ms. Salman’s would be pensionable employment if all of B2C’s clients and
prospective clients were in Canada;
2)
Each of Mr. Toma
and Ms. Salman is resident in Canada; and
3)
Each of these two
employees was paid at or from an establishment in Canada of B2C.
Thus, it is clear that, even if the employment
constitutes employment outside Canada because some of the employees’ services
to their employer B2C were rendered outside Canada, the employment is
nonetheless deemed to be pensionable employment by virtue of
Regulation 16(1)(b).
[9]
This result is
consistent with the judgment of Hershfield J. of this Court in DatEx Semiconductor Incorporated v. M.N.R. which considered Regulation 16(1)(b)
and specifically the definition of “establishment in Canada” and the meaning of
the words “paid at or from” the employer’s Canadian establishment.
[10]
The Appellant’s
position is that, notwithstanding Regulation 16(1)(b) deems this
employment to be pensionable employment, this employment is excluded from being
pensionable employment under Regulation 34 which deals with workers placed
by a placement or employment agency. There are two reasons why this position is
wrong in law.
[11]
First,
Regulation 34 is a rule which deems placement or employment agencies to be
employers of individuals placed by them. It does not exclude anyone otherwise
in pensionable employment.
[12]
Second, it is clear
that B2C is not a “placement or employment agency” as defined in
Regulation 34(2) for these purposes. The evidence does not support it
being characterized as an entity “engaged in the business of placing
individuals in employment or for performance of services or of securing
employment for individuals for a fee, reward or other remuneration.” It is
clear from the representative contracts in evidence that B2C commits itself to
its customers to provide its professional consulting services through named
individuals working for it.
[13]
The Appellant placed
considerable emphasis upon the section on Placement/Employment Agencies in the
publication by the CPP/EI Rulings division of the Canada Revenue Agency (“CRA”)
entitled “CPP/EI Explained”. It is clear from the definition section of this
publication that the document is only concerned with entities that are
placement or employment agencies as defined in Regulation 34(2) described
above. Since B2C is not such an entity, this CRA publication is not a relevant
consideration either.
[14]
In the Federal Court of
Appeal’s decision in OLTCPI Inc. v. Canada (The Minister of National Revenue), the Court
considered the meaning of the term of placement agency in the CPP
Regulations. The Court wanted to ensure that the placement agency
provisions not apply to persons, such as a subcontractor, providing services
which require that workers attend at the premises of the client and perform
functions, sometimes at the direction of the client. They emphasized that the
question in this regard is whether the person concerned is merely supplying
workers or is doing so in the course of providing a distinct service. The Court
quoted with approval the Tax Court of Canada’s decision in Supreme Tractor
Services Ltd. v. M.N.R.
In that case, the Tax Court Judge wrote:
13 The question as I see it is not so much about who is the
ultimate recipient of the work or services provided as this will cover every
single possible subcontract situation, but rather who is under obligation to
provide the service. If the entity alleged to be the placement agency is under
an obligation to provide a service over and above the provision of personnel,
it is not placing people, but rather performing that service and is not covered
by the Regulations.
[15]
It is clear from the
wording of Regulation 34 and from how Regulation 34 has been applied
in OLTCPI and Supreme Tractor that, on the evidence before me of
B2C’s business and contracts, B2C is committed to perform a service to its
clients that is not placing people and that the placement of its workers at its
ultimate customers premises is not a mere supply of workers but is being done
in the course of B2C providing a distinct service.
[16]
It does not matter that
B2C’s business could have been operated as a placement agency if it was
reorganized and if its customers were agreeable to such a different
relationship.
[17]
The appeal is
dismissed.
Signed at Toronto, Ontario, this 8th day of June 2012.
"Patrick Boyle"
Email this Content