Cloutier v. The Queen, 2003 DTC 317 (TCC)
The taxpayer, who was a U.S. citizen and a resident of Canada, was not exempt under Article XIX on employment income earned by her as a teacher in the United States. Article XIX of the Canada-U.S. Convention was intended to deal with citizens working abroad in the discharge of a governmental function. "Functions of a governmental nature" was not intended to include functions that are commonly found in the private sector, such as education. Public school and university teaching services were intended to be governed by Article XV.
The wife of a couple, both of whom were Canadian residents, was a French national who received a salary that was exempt under Art. XIX, para. 1 of the Convention with France, that was not reported on a T4 information slip. CRA stated:
First, the total employment income amounts shown in box 14 of a taxpayer's T4 slips should generally be reported on line 101 of a return. Instead, a taxpayer's income from employment for a taxation year that is not reported on a T4 slip should be reported on line 104 of the taxpayer’s return for that year.
Furthermore, a taxpayer's claim for exemption from Canadian tax under paragraph 1 of Article XIX of the Canada-France Convention in respect of salaries, wages and other similar remuneration, other than pensions paid by France, must be claimed on line 256 of the taxpayer's return with the words "Income not taxable under a convention" as a clarification. Thus, this exemption from Canadian tax is technically provided to a taxpayer through a deduction in computing taxable income under subparagraph 110(1)(f)(i). Note that a taxpayer may attach an explanatory note to the taxpayer’s return to substantiate the claim for a deduction.
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|Tax Topics - Income Tax Act - Section 63 - Subsection 63(2)||child care expenses could only be claimed by the spouse with the lower net income, notwithstanding that her income was Treaty-exempt||72|
T.I. 921585 (December 1992 Access Letter, p. 24, ¶C111-048)
A Canadian citizen who is employed at the Canadian embassy in Washington will be subject to tax in Canada even after he has acquired U.S. citizenship.