16 March 1999 External T.I. 9806375 - EMPLOYMENT INCOME

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Employee or independent contractor?

Position: Question of fact -

Reasons: Facts and determination by TSO

XXXXXXXXXX 990637
C. Tremblay
March 16, 1999

Dear XXXXXXXXXX:

Re: Employment Income

This is in reply to your letter of January 11, 1999,and further to our letter of February 22, 1999, wherein you ask for a ruling on whether your United States (“U.S.”) based income is employment income or self-employed income.

Our Comments:

As we mentionned in our prior letter, since this is a completed transaction, you having been “hired” in January of 1998, we cannot provide an advance income tax ruling. Normally, if your work is with a Canadian corporation, the CPP/EI Eligibility Division would provide a determination of whether you are an employee or self-employed for CPP/EI purposes. However, since your concern is how your U.S. income should be reported on your T-1 return, they were unable to answer your enquiry. We apologize for the delay and we offer the following by way of general comments

The determination of whether a taxpayer is an employee or an independent contractor is a question of fact. Cases to date have in most instances indicated that the most important distinguishing factor is the nature of the control exercised by the employer over the employee. It is necessary to review and analyze carefully the facts of the particular situation to which the above test is to be applied, and determine whether the relationship is either one of contract of services or a contract for services.

Based on the fact that the U.S. corporation decides on the time frame of the work, the hours of work, approves vacation and time-off, and decides how and when the work should be completed, it is our opinion that your income should be reported as employment income.

The Department has issued a guide titled “Employee or Self-Employed” which is available at tax services offices, tax centres and on the internet at http://www.rc.ga.ca which discusses the subject further.

We trust these comments will be of assistance

Your truly

J. F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

- 2 -