Principal Issues: Whether the proposed employment of a doctor at a XXXXXXXXXX clinic in XXXXXXXXXX would qualify for an overseas employment tax credit.
Position: No. The doctor would not be employed by a specified employer as defined for an OETC.
Reasons: The terms of employment specify that the doctor would be an employee of the Ministry of Health and Social Welfare of the government of XXXXXXXXXX
2005-012887
XXXXXXXXXX Charles Rafuse
613-957-8967
May 31, 2005
Dear XXXXXXXXXX:
Re: Overseas Employment Tax Credit ("OETC")
This is in reply to your letter of April 20, 2005, concerning the proposed employment of XXXXXXXXXX at a XXXXXXXXXX clinic in XXXXXXXXXX.
Specifically, you have inquired whether the terms of employment for XXXXXXXXXX would qualify her to claim an OETC. She would be an employee of the Ministry of Health and Social Welfare of the government of XXXXXXXXXX.
Our Comments
Having considered the proposed employment conditions for XXXXXXXXXX, we determined that an advance income tax ruling would not be appropriate and are returning your $535 deposit under a separate cover. However, we are prepared to offer the following general comments, which may be of assistance.
The OETC provides a deduction from the amount that would otherwise be an individual's tax payable for a taxation year. The OETC is available if the individual meets the following criteria:
1. the individual was resident in Canada in the year;
2. the individual was employed by a "specified employer" (generally a person resident in Canada or a corporation that is a foreign affiliate of a person resident in Canada) throughout any period of more than six consecutive months (the "qualifying period") that commenced before the end of the year and included any part of the year, other than for the performance of services under a prescribed international development assistance program of the Government of Canada; and
3. throughout that "qualifying period" performed all or substantially all (i.e., more that 90%) of his or her employment duties outside Canada in connection with a contract under which the specified employer carried on business outside Canada with respect to:
a) the exploration for or exploitation of petroleum, natural gas or other similar resources,
b) any construction, installation, agricultural or engineering activity, or
c) any prescribed activity (i.e., an activity performed under a contract with the United Nations), or
d) for the purpose of obtaining, on behalf of the specified employer, a contract to undertake any of these activities ("qualifying activities").
In the Case of XXXXXXXXXX, the documentation from XXXXXXXXXX indicates that she would be an employee of the Ministry of Health and Social Welfare of the government of XXXXXXXXXX. Accordingly, it is our view that her employment conditions do not meet that test of being employed by a specified employed, as explained above, and thus she would not qualify for an OETC.
Subparagraph 110(1)(f)(iii) of the Income Tax Act provides for a deduction in the computation of taxable income with respect to "income from employment with prescribed international organizations". For the purposes of these rules, the "prescribed international organizations" include the United Nations and certain specialized agencies within the United Nations system, such as the World Bank. However, it is again our view that since XXXXXXXXXX is to be an employee of the Ministry of Health and Social Welfare of the government of XXXXXXXXXX she would not qualify for this tax exemption.
We trust this information is helpful.
Yours truly,
Charles Rafuse
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch