30 June 2009 External T.I. 2008-0304311E5 F - Période admissible - CIEE
Principal Issues: [TaxInterpretations translation] For the purposes of the Overseas Employment Tax Credit, when does the qualifying period of more than six consecutive months begin and end?
Position: None, but a few examples illustrate certain situations.
Reasons: Question of fact.
2008-030431 XXXXXXXXXX Sylvie Labarre, CA (613) 957-8981 June 30, 2009
Dear Sir,
Subject: Overseas Employment Tax Credit
This is in response to an email sent to us by XXXXXXXXXX on December 17, 2008 regarding the qualifying period required to claim the overseas employment tax credit (OETC).
Our Comments
As stated in Interpretation Bulletin IT-497R4, Overseas Employment Tax Credit (hereafter the "Bulletin"), to be eligible for the OETC, an individual must satisfy the following conditions:
(a) be employed by a specified employer (generally, a resident of Canada), other than for the performance of services under a prescribed international development assistance program of the Government of Canada;
(b) be employed in connection with a contract under which the specified employer carried on business outside Canada on a resource, construction, installation, agricultural, engineering or prescribed activity (or for the purpose of obtaining such a contract); and
(c) have performed all or substantially all the employment duties (in connection with a contract described in (b) above) outside Canada.
The conditions described in (a) to (c) above must be satisfied for a period of more than six consecutive months that falls within one of the following periods:
- within the year,
- beginning in the year and ending in a subsequent year, or
- ending in the year and that began in a previous year.
As stated in paragraph 9 of the Bulletin, "six consecutive months" means either six entire months named on a calendar or a period starting from a given day in one month and ending on the day before the corresponding day of the sixth month and "more than six consecutive months" means six months plus at least one day.
The question of what is the beginning and end of an eligible period in determining its duration depends on the facts of each situation. For example, if an employee is hired under a single contract outside Canada and the employee does not perform duties in Canada in relation to that contract, we will consider the qualifying period to begin on the first day that the employee performs the duties of his or her employment outside Canada under that contract and end on the day that the employee ceases to perform the duties of his or her employment outside Canada under that contract.
For greater certainty, an individual will be eligible for the OETC in respect of a particular taxation year only if there is an employment relationship between the individual and a "specified employer" and that relationship continues throughout the period of more than six consecutive months beginning or ending in the particular taxation year. Whether or not there is an employment relationship between an individual and a "specified employer" is a question of fact and law that requires an analysis of the relationship between the parties and any agreement between them.
In addition, the OETC will not necessarily be denied on the basis that the individual has not actually been outside Canada or at a place of employment outside Canada for the entire period of more than six consecutive months, provided that during that entire period, the individual performs substantially all of the duties of his or her employment outside Canada.
The "all or substantially all" test is considered to be met if 90% of the duties were performed abroad. The determination is made by comparing the actual time an individual spent performing the qualifying duties to the total time spent performing all duties during that same period. When the aggregate of the employment duties performed outside Canada in connection with ineligible activities and those performed in Canada in connection with any activity represent more than 10% of all the employment duties, the individual will not meet the "all or substantially all" test.
For example, if an individual was employed by a specified employer under a single contract that included certain duties performed in Canada and those duties were performed at the beginning and end of the contract, the qualifying period could include those periods in Canada as long as the individual performed all or substantially all of the duties of his or her employment outside Canada.
On the other hand, where the individual is employed by a specified employer under more than one contract outside Canada, it is possible to take into account several successive and continuous periods of time spent outside Canada, as the case may be, provided that, during the period established, the individual performed all or substantially all of the duties of his or her employment outside Canada for a specified employer under eligible contracts and provided that there was no termination of employment between each of them and that the employee was not an employee on demand.
As you can see, the determination of the qualifying period and its duration is essentially a question of fact. Interpretation Bulletin IT-497R4 contains additional information on the OETC. This Bulletin is available on the Canada Revenue Agency's website at http://www.cra-arc.gc.ca/menu-eng.html. If you have any further questions about this document, you can contact Alain Godin at 613-957-2745.
We suggest that you contact Revenu Québec to find out the specifics of any deductions provided for under the Quebec Taxation Act with respect to remuneration from employment outside Canada.
These comments are not advance income tax rulings and are not binding on the CRA in respect of any particular situation.
Best regards
Alain Godin
for the Director
International Operations and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.