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Overseas Employment Tax Credit (OETC) – Phase Out

posted Jan 9, 2013, 5:58 PM by Margaret Lin CPA, CGA, CFP   [ updated Jan 9, 2013, 6:11 PM ]

An OETC can be claimed by an individual resident in Canada who works abroad for at least six consecutive months for a specified employer in connection with a resource, construction, installation, agricultural or engineering contract or for purposes of obtaining those contracts. In general terms, the credit equals the individual's tax payable on 80% of their qualifying foreign employment income (QFEI) or $80,000 (maximum QFEI), whichever is less.

Over the period from 2013 to 2016, the OETC will be phased out.  The OETC will be eliminated in 2016.
The percentage of QFEI and the maximum QFEI used in the calculation of the OETC will be reduced as follows:

                         Year                 Percentage       Maximum QFEI

                          2013                 60%                  $60,000

2014                 40%                  $40,000

2015                 20%                  $20,000

2016                 0%                   $0

The phase-out will not apply to the QFEI earned by you in connection with a contract that your employer committed to in writing before March 29, 2012 (referred to as protected QFEI). The OETC will be eliminated in all cases for 2016 and subsequent years.