Dear Sirs:
This is in reply to your letter dated March 7, 1991 whereby you requested our opinion as to whether an employee would be considered to perform the duties of his employment in 24(1) in connection with a contract under which the employer carries on business in for the purposes of qualifying for the overseas employment tax credit provided under section 122.3 of the Income Tax Act (the "Act").
Facts
1.
2.
24(1)3.
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Our Comments
An individual (employee) must have performed all or substantially all the duties of his employment in one or more countries other than Canada in connection with a contract under which the specified employer carried on business in such other country or countries with respect to the exploration for or exploration of petroleum, natural gas, minerals or other similar resources. Accordingly, the employer must have a contract under which it undertook such activities.
While Canco may be carrying on business in a foreign country, it does not appear to have a contract to undertake 24(1) activity. In our opinion, a sales contract such as that described above will generally not qualify as a contract described in paragraph 122.3(1)(b)(i) of the Act. As the overseas employment tax credit was introduced in order to permit Canadian businesses bidding on overseas contracts to be in a better position to compete with foreign firms on such projects, our opinion appears to be in line with such intent.
In order for us to reach a conclusive opinion on such a transaction, we could have to review the contract itself and its connection, if any, with Canco's acquisition of the 24(1) In the event this hypothetical example becomes a contemplated transaction, any request for a technical interpretation should be in the form of a request for an advance income tax ruling in accordance with the Information Circular 70-6R2 dated September 28, 1990. The foregoing opinions are not advance rulings and are not binding on the Department.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch