29 November 1984 Income Tax Severed Letter

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.

November 29, 1984

Peter Salvatori

XXXX

This is in reply to your letter of September 6, 1984.

You indicate that you may be transferred to your employer's United States office and would like information concerning the tax implications associated with such a move. Your duties would require you to provide employment services in both Canada and the United States.

We regret that we are unable to provide you with specific and detailed information due to the generality of your request. Your current and future residence status for tax purposes, your citizenship, the period of time spent working in Canada and the United States, and the amounts of remuneration received in respect thereof are among the factors which may bear upon the tax treatment of your employment income at any particular time. Moreover, should your transfer to a new work location in the United States involve the severance of your residential ties with Canada, certain provisions of the Income Tax Act applicable when a taxpayer ceases to reside in Canada would come into play.

Generally, residents of Canada are taxed on their world income from all sources. A foreign tax credit may, within the limits permitted under the Act, normally be claimed in respect of taxes paid to a foreign government on certain foreign source income. Article XV of the new Canada-United States Income Tax Convention, which with regard to employment earnings is effective January 1, 1985, exempts from tax in the United States the employment income derived therein by a resident of Canada if the remuneration does not exceed $10,000 U.S. or if the recipient is present in the United States for 183 days or less in the year and the remuneration is not paid by a United States employer or by a permanent establishment in the United States of the Canadian employer. The same exemption is available in like circumstances for a United States resident rendering services in Canada, except that the remuneration must not exceed $10,000 Canadian if the monetary limitation is relied upon.

Under the current Canada-United States Income Tax Convention a similar exemption under Article VII is in place for residents of Canada in circumstances where the taxpayer is present in the United States for a period not exceeding 183 days in the year and

a) his compensation is received for services performed as an employee of his Canadian employer or of a permanent establishment in Canada of his United States employer, or

b) his compensation received for such personal services does not exceed $5,000.

The same exemption is available in like circumstances for a United States resident rendering services in Canada.

Employment income earned in Canada by a United States resident taxpayer which is not exempt under the provisions of the current or new Conventions, as the case may be, is taxable in Canada.

We have enclosed herewith a departmental publication entitled "Living Outside Canada" which may be of assistance to you. For further information concerning any printed material available to the public, we suggest that you contact the appropriate division at the following address:

Information Services Revenue Canada Taxation 2nd Floor, Metcalfe Building 875 Heron Road Ottawa, Ontario K1A OL8

With regard to your question relating to the tax treatment of United States real property disposals by residents of Canada, we enclose herewith a copy of a form letter which should be of assistance.

                    Yours sincerely,

                    Director
                    Provincial and International 
                    Relations Division

Enclosures PES/jb c.c.: Gail Perrin