7 August 1990 Income Tax Severed Letter - Employment income and the Canada-USSR Tax Convention

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.

Dear Sir:

This is in reply to your letter of March 21, 1990 wherein you requested an income tax ruling on behalf of XXX

Our understanding of the facts is as follows:

• 1. XXX
• 2. XXX
• 3. XXX
• 4. XXX
• 5. XXX
• 6. XXX
• 7. XXX
8. XXX
• a) XXX
• b) XXX
• c) XXX
• 9. XXX
• 10. XXX
• 11. XXX
• 12. XXX
• 13. XXX
• 14. XXX

In accordance with the guidelines set out in paragraphs 14(a) and 14(1) of Information Circular 70-6R, an advance income tax ruling may not be given in those case involving completed transactions and matters on which a determination is requested is primarily one of fact. Since XXX situation involves completed transactions and question of fact issues, we are unable to provide you with an advance ruling. However, we are prepared to offer the following general comments.

In our view, it is always a question of fact whether XXX is a factual resident, a deemed resident or a non-resident of Canada for a particular year. Even though he may be a factual resident or a deemed resident of Canada, it is possible that, for purposes of the Canada-USSR Tax Convention (the "Convention"), he may be deemed to be resident of the USSR by virtue of the residency tie-breaking rules in paragraph 2 of Article 4 of the Convention.

If it is determined that XXX is a resident of the USSR under paragraph 1 or 2 of Article 4 of the Convention for a particular year, the provisions of Article 12 of the Convention will be available to him for the year. On the other hand, if it is determined that XXX is a resident of Canada under paragraph 2 of Article 4 of the Convention for a year, the provisions of Article 12 of the Convention will not be available to him for the year.

The Canadian tax implications under Article 12 of the Convention for a XXX who is employed by XXX and who is considered to be a resident of the USSR for purposes of the Convention can be summarized as follows:

• (i) Paragraph 1 of Article 12 limits the amount of employment income subject to tax in Canada to the salary, wages and other remuneration derived from the duties performed in Canada under the employment contract. Therefore, the portion of employment income earned in respect of duties exercised outside of Canada would not be subject to tax in Canada.
• (ii) Since one or more of the conditions set out in paragraph 2 of Article 12, in particular, subparagraph 2(b) and 2(c) thereof, cannot be satisfied, there is no further reduction of the amount that is subject to tax in Canada under paragraph 1 of Article 12.
• (iii) The portion of the total remuneration which is subject to tax in Canada under paragraph 1 of Article 12 of the Convention would be exempt from tax in Canada by virtue of paragraph 4 of Article 12.

We trust that our comments will be of assistance to you.