31 May 2011 External T.I. 2011-0399091E5 - Duties of a Temporary Nature

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.

Principal Issues: Whether employees seconded to work in Canada on a project for two to four years are considered to be performing duties of a temporary nature for the purpose of subsection 6(6) of the ITA.

Position: Yes

Reasons: Even though the period in which the employees may be at the work location is beyond the two-year period noted in the general guidelines of paragraphs 5 and 6 in IT-91R4, the facts of this situation are such that the duties of employment are considered of a temporary nature for purposes of subsection 6(6) of the Act.

XXXXXXXXXX
					2011-039909
					K. G. Weir
May 31, 2011

Dear XXXXXXXXXX :

Re: Special Work Site Exemption-Duties of a Temporary Nature

We are writing in response to your letter dated March 11, 2011, requesting clarification of the term "temporary" as it relates to subsection 6(6) of the Income Tax Act (Canada) ("ITA") for employees seconded from the parent company in XXXXXXXXXX (the "Parent") to work for the Canadian company (the "Company") at a special work site in Canada. More specifically, you have enquired whether the specific duties performed by employees would be considered temporary for purposes of subsection 6(6) of the ITA.

You advise that employees from the Parent are temporarily seconded to the Company to undertake specific tasks on a project to XXXXXXXXXX in Canada. A seconded employee signs an employment contract for a period ranging from two to four years agreeing to the secondment to Canada with the understanding that they could be reassigned to another work location in or outside of Canada or returned to their substantive position in XXXXXXXXXX . The contract includes a housing allowance for the employee based on market rates and corresponding to each family's composition. Some of the employees have taken their families with them to Canada and enrolled their children in school. Seconded employees file tax returns in Canada and XXXXXXXXXX and complete CRA form TD4, Declaration of Exemption - Employment at a Special Work Site.

The employees' substantive employment position remains with the Parent where they maintain their seniority rank and all matters related to their career. Seconded employees maintain social benefit coverage and a bank account in XXXXXXXXXX . They also maintain a permanent residential self-contained domestic establishment for their exclusive use in XXXXXXXXXX .

Our Comments

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.

Generally, the value of employer-provided board and lodging or transportation to and from a particular work location is included in an employee's income for tax purposes pursuant to subsection 6(1) of the ITA. However, subsection 6(6) of the ITA provides an exception in limited circumstances for employment at a special work site or a remote work location.

Subparagraph 6(6)(a)(i) of the ITA provides for an exclusion from an employee's income, for the value of employment benefits received or enjoyed, or a reasonable allowance in respect of, expenses incurred by the employee for board and lodging at a special work site. Subparagraph 6(6)(b)(i) of the ITA provides such an exclusion for a reasonable allowance or actual expenses in respect of transportation to and from the special work site. For these exclusions to apply the provisions, in part, requires that the duties performed by the employee be of a "temporary nature."

Paragraphs 5 and 6 of Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, contain comments on whether employment duties at a special work site will be considered temporary for purposes of subsection 6(6) of the ITA. The term temporary, while not defined in the ITA, generally refers to situations where continuous employment is limited to a period of two years. However, there may be situations where an employment period extends beyond two years, in which it will be appropriate to consider the duties to be of a temporary nature.

Based on the information provided, it is our view that the duties of the employees seconded to Canada are temporary in nature for purposes of subsection 6(6) of the ITA, even though the contract may extend beyond two years.

We trust our comments will be of assistance.

Yours truly,

Phyllis Waugh
A/Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch