12 March 2008 Internal T.I. 2007-0261541I7 - Deemed residency

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: Pursuant to paragraph 250(1)(c) of the Act, a person mentioned in subparagraph (i) or (ii) has to receive representation allowances in respect of the year or has to be resident in Canada immediately prior to appointment or employment by Canada. What is meant by "immediately prior to appointment or employment in Canada"?

Position: It means immediately prior to the time when the person is hired.

Reasons: Previous position taken that it refers to hiring rather than actual commencement of employment.

 								March 12, 2008

	Jeffrey Haynes					HEADQUARTERS
	Senior Programs Officer				Income Tax Rulings Directorate
	Individual Programs Section			Sylvie Labarre
	Taxpayer Services Directorate			(613) 957-8981
	Taxpayer Services and Debt Management Branch
								2007-026154

Deemed Residency

We are writing in response to your electronic message of December 3, 2007 in which you requested our views on the meaning of "immediately prior to appointment or employment by Canada" used in paragraph 250(1)(c) of the Income Tax Act (the "Act").

The International Tax Services Office is concerned with situations where individuals ceased to be resident in Canada or severed residential ties with Canada such that they would otherwise become non-resident and became employed by Canada at an embassy within a very short time period after the cessation of residence or departure (2 to 14 days).

To be deemed resident in Canada in a taxation year pursuant to paragraph 250(1)(c) of the Act, a person mentioned in subparagraph 250(1)(c)(i) or (ii) of the Act has to be resident in Canada immediately prior to appointment or employment or has to receive representation allowances in respect of the year.

Your position is that the moment which is "immediately prior to appointment or employment" refers to the moment of the communication and acceptance of an offer of employment by the individual or that can be considered such a moment.

Your view is that the time at which an arrangement or contract is agreed upon by both parties is the time at which the person is appointed or hired. While such arrangements or contracts are often formalized in written format, there is no such actual requirement. Therefore, the arrangements or contracts could be made verbally. There is no need for a formal confirmation of employment or hiring in the form of a letter or written contract.

You are asking whether we concur with your view.

Our position is that the phrase "immediately prior to appointment or employment by Canada" refers to the time when the person is hired and not when the person actually commences employment and therefore, the residency test would have to be applied immediately prior to the time when the person is hired.

We agree with your view as stated above, except that it should be clear that the residency test has to be applied immediately prior to the time referred to in your position.

We trust that our comments will be of assistance.

Alain Godin
Section Manager
For Division Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch