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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
SUBJECT: PRAIRIE TAX CONFERENCE (Q #13) SECTION: 115(2)(c), 115(2)(e), 153(1), REG 104 (2)]
April 27, 1992 PRAIRIE TAX CONFERENCE DRAFT/EBAUCHE May 19 & 20, 1992 Question 13
Assume that an individual moved from Canada (severed all residential ties) to the United states in 1991. This individual continues to be employed by a Canadian corporation (not a Crown corporation) and receives a reasonable salary. The individual was in Canada for 100 days during 1991 and in the U.S. for the remainder. The salary is paid evenly throughout the year. The portion paid to the individual after he or she ceases to be a resident of Canada relates to employment exercised in the U.S. and not in Canada and is subject to income tax imposed by the U.S.. Is the corporation required to withhold the maximum amount of income taxes or can the individual request a reduced withholding based on the estimated taxes payable by the individual? Would subsection 153(1.1) apply?
Department's Position
In this case, during the period of non-resident status, pursuant to paragraphs 115(2)(c) and (d) and section 114.1 of the Income Tax Act ("Act") , for purposes of subsection 2(3) of the Act the individual shall be deemed to have been employed in Canada in the year. However, pursuant to clause 115(2)(e)(i)(A) of the Act, the remuneration in respect of those services performed in the U.S. will not be included in the computation of Taxable Income Earned in Canada (as computed under paragraph 114(b) of the Act). In addition, pursuant to paragraph 1 of Article XV of the Canada-U.S. Income Tax Convention, where the individual is liable for tax in the U.S. by reason of his residence or domicile, the U.S. will have exclusive right to tax remuneration received during that period where the services are performed in the U.S..
As the remuneration in the non-resident period in this case is not remuneration described in subparagraph 115(2)(e)(i) of the Act, pursuant to subsection 104(2) of the Income Tax Regulations, the Canadian employer is not required to withhold income tax on such remuneration.
Author: Jim Wilson
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1992
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1992
Email this Content