Question

A consulting engineer incorporated a company for the purpose of carrying on his business and to allow for expansion in the future should he wish to expand his operations. Most of the corporation’s clients were located in Canada, but in 2002 the Corporation obtained two very large contracts for consulting services from a corporation located in the United States. The engineer spent eight months working in the United States to complete the contract work, and at the end of the taxation year, the engineer filed his personal income tax return, claiming the overseas tax credit allowed to employees working abroad. The Minister of Revenue denied the engineer his overseas tax credit on the basis that he was not an employee, and therefore not entitled to the tax credit. The engineer challenged the ruling.
Discuss the arguments that the taxpayer and the Ministry may raise. Render a decision

Answer 1

Even though the Engineer was a consultant who has incorporated a company for his consulting business, but when a abroad corporation appoints/employ the consultant to undertake work in other nation, then he represent the company as a employee and he is abid with all employees rules. So, the revenue ministry can not deny him the overseas tax credit. Moreover, the consultant has spent eight months overseas which is a significant time.

As per ministry, the rules of overseas tax credit is applicable to the company's employee, so the Engineer is not entited for the same.

But when a corporation employs any person, he or she become employee who works for the company, so the Engineer is also demeed to be employee of the company and can be granted the Overseas tax credit to Engineer.

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