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Citation: 2004TCC840
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Date: 20041222
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Docket: 2002-1826(IT)G
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BETWEEN:
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NORMAN GAUDREAU,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Lamarre, J.
[1] These are appeals from assessments
made by the Minister of National Revenue ("Minister")
under the Income Tax Act ("Act") for the
1996, 1997, 1998 and 1999 taxation years. In filing his income
tax returns for those years, the appellant claimed deductions
pursuant to subparagraph 110(1)(f)(i) of the
Act for amounts exempt from income tax in Canada because
of a provision contained in a tax convention, namely
Article 4 of the Canada-Egypt Income Tax Convention
("Convention"). The amounts so claimed are $39,179 for
1996, $246,377 for 1997, $355,777 for 1998 and $292,404 for
1999.
[2] In assessing the appellant, the
Minister disallowed the deduction of these amounts claimed under
subparagraph 110(1)(f)(i) of the Act and also
included in his income for those years the amounts of $7,379,
$29,191, $46,975 and $47,930 respectively. These latter amounts
correspond to the income tax paid on the appellant's behalf
to the country of Egyptby his employer in those years.
Furthermore, the Minister allowed foreign tax credits under
section 126 of the Act, in the amounts of $46,975 and
$47,930 for the taxation years 1998 and 1999 respectively.
[3] In so assessing the appellant, the
Minister took the position that the appellant was a resident of
Canada during the years at issue and was liable to tax on his
income from sources inside and outside Canada. The Minister was
also of the view that although the appellant was a resident of
Egypt as well in those years, his personal and economic relations
(his centre of vital interests) remained closer to Canada than
Egypt and therefore he was liable to tax in Canada, and not in
Egypt, by virtue of Article 4(2) of the Convention. The
Minister therefore assessed the appellant in accordance with
section 2 of the Act. The Minister was equally of the
view that the appellant was properly assessed in accordance with
paragraph 6(1)(a) of the Act as a result of
the payment of his Egyptian taxes by his employer in the same
years.
[4] The appellant submits that he was
not ordinarily resident in Canadawithin the meaning of subsection
250(3) of the Act during the period in which he lived and
worked in Egypt, from October 3, 1996 to April 1, 2000. The
appellant also submits that if he is considered a resident of
Canada during those years, he is also deemed to be a resident of
Egyptpursuant to Article 4(2) of the Convention by reason of
the fact that his personal and economic relations (centre of
vital interests) were closer to Egypt than to Canadaat that time.
Accordingly, the appellant submits that, pursuant to
Article 15 of the Convention, he was taxable only in Egypt
during the period he was residing there. Finally, the appellant
submits that if he is considered a resident of Canada and,
pursuant to Article 4 of the Convention, he is taxed as a
resident of Canada rather than of Egypt, full foreign tax credit
relief should be accorded him pursuant to section 126 of the
Act for all the taxation years that he worked in Egypt,
and not only for 1998 and 1999.
[5] On this latter point, the Minister
concedes that the appellant should be allowed a foreign tax
credit in the amount of $7,379 for 1996 if he is taxable in
Canada.
[6] However, with respect to 1997 both
parties agree that the appeal should be quashed because the
appellant did not serve the Minister with a notice of objection
for that year, such service being under section 169 of the
Act a condition precedent to the filing of an appeal.
[7] The relevant portions of the
statutory provisions relied upon by both parties herein are
reproduced below.
INCOME TAX ACT
PART I
INCOME TAX
DIVISION A - Liability for Tax
SECTION 2: Tax payable by persons resident in
Canada.
(1) An income tax shall be paid, as required by this
Act, on the taxable income for each taxation year of every person
resident in Canada at any time in the year.
. . .
SECTION 6:Amounts to be included as income from office or
employment.
(1) There shall be included in computing the income of
a taxpayer for a taxation year as income from an office or
employment such of the following amounts as are applicable:
4 6(1)(a) 3
(a) Value of benefits - the value of board,
lodging and other benefits of any kind whatever received or
enjoyed by the taxpayer in the year in respect of, in the course
of, or by virtue of an office or employment . . .
DIVISION C - Computation of Taxable Income
SECTION 110: Deductions permitted.
(1) For the purpose of computing the taxable income of
a taxpayer for a taxation year, there may be deducted such of the
following amounts as are applicable:
. . .
4 110(1)(f) 3
(f)Deductions for payments - any social
assistance payment made on the basis of a means, needs or income
test and included because of clause 56(1)(a)(i)(A) or
paragraph 56(1)(u) in computing the taxpayer's
income for the year or any amount that is
(i) an amount exempt from
income tax in Canada because of a provision contained in a tax
convention or agreement with another country that has the force
of law in Canada.
. . .
DIVISION E - Computation Of Tax
SECTION 126: Foreign tax deduction.
(1) A taxpayer who was resident in Canada at any time in a
taxation year may deduct from the tax for the year otherwise
payable under this Part by the taxpayer an amount equal to
(a) such part of any non-business-income tax paid by
the taxpayer for the year to the government of a country other
than Canada (except, where the taxpayer is a corporation, any
such tax or part thereof that may reasonably be regarded as
having been paid by the taxpayer in respect of income from a
share of the capital stock of a foreign affiliate of the
taxpayer) as the taxpayer may claim,
not exceeding, however . . .
DIVISION J - Appeals to the Tax Court of Canada and
the Federal Court of Appeal
SECTION 169: Appeal.
(1) Where a taxpayer has served notice of objection to an
assessment under section 165, the taxpayer may appeal to the
Tax Court of Canada to have the assessment vacated or varied
after either
(a) the Minister has confirmed the assessment or
reassessed, or
(b) 90 days have elapsed after service of the notice of
objection and the Minister has not notified the taxpayer that the
Minister has vacated or confirmed the assessment or
reassessed,
but no appeal under this section may be instituted after the
expiration of 90 days from the day notice has been mailed to
the taxpayer under section 165 that the Minister has
confirmed the assessment or reassessed.
. . .
PART XVII - Interpretation
SECTION 250: . . .
4 250(3) 3
(3) Ordinarily resident. In this Act, a reference to a
person resident in Canada includes a person who was at the
relevant time ordinarily resident in Canada.
CANADA-EGYPT INCOME TAX CONVENTION
. . .
Article 4 - Resident
1. For the purposes of this Convention, the term
"resident of a Contracting State" means any
person who, under the laws of that State, is liable to tax
therein by reason of his domicile, residence, place of management
or any other criterion of a similar nature.
2.Where by reason of the provisions of paragraph 1
an individual is a resident of both Contracting States, then his
status shall be determined as follows:
(a) he shall be deemed to be a resident of the State in which he
has a permanent home available to him; if he has a permanent home
available to him in both States, he shall be deemed to be a
resident of the State with which his personal and economic
relations are closer (centre of vital interests);
(b) if the State in which he has his centre of vital interests
cannot be determined, or if he has not a permanent home available
to him in either State, he shall be deemed to be a resident of
the State in which he has an habitual abode;
(c) if he has an habitual abode in both States or in neither of
them, he shall be deemed to be a resident of the State of which
he is a national;
(d) if he is a national of both States or of neither of them, the
competent authorities of the Contracting States shall settle the
question by mutual agreement.
. . .
Article 15 - Dependent Personal Services
1. Subject to the provisions of Articles 16, 18 and 19,
salaries, wages and other similar remuneration derived by a
resident of a Contracting State in respect of an employment shall
be taxable only in that State unless the employment is exercised
in the other Contracting State. If the employment is so
exercised, such remuneration as is derived therefrom may be taxed
in that other State.
2. Notwithstanding the provisions of paragraph 1,
remuneration derived by a resident of a Contracting State in
respect of an employment exercised in the other Contracting State
shall be taxable only in the first-mentioned State if
(a) the recipient is present in the other Contracting State
for a period or periods not exceeding in the aggregate 90 days in
the calendar year concerned, and
(b) the remuneration is paid by, or on behalf of, an employer
who is not a resident of the other State, and
(c) the remuneration is not borne by a permanent establishment
or a fixed base which the employer has in the other State.
Issue
[8] The question at issue is whether
the appellant was ordinarily resident in Canadaduring the period
from October 1996 to April 2000, when he worked in Egyptunder a
contract of employment with Babcock & Wilcox Industries Ltd.
("Babcock & Wilcox"). In the affirmative, and
because it is admitted by both parties that the appellant was a
resident of Egypt during that period, the tie-breaker rules
in Article 4 of the Convention will apply, as the appellant would
then have been a resident of both countries. The question in that
event will be whether the appellant's personal and economic
relations (centre of vital interests) were closer to Canada than
Egyptin that same period.
[9] Both parties agree that if this is
the case the appeals should be dismissed for 1998 and 1999, and
allowed for 1996 only to the extent of allowing the foreign tax
credit of $7,379 under section 126 of the Act. It should
be remembered here that the appeal for 1997 will be quashed on
procedural grounds.
[10] The respondent concedes that if the
appellant shows that his personal and economic relations were
closer to Egyptthan Canadaduring the period at issue, the appeals
should be allowed for the taxation years 1996, 1998 and 1999.
Facts
[11] The appellant is a Canadian citizen. He
is a mechanical engineer who has been working for the past 20
years for businesses specializing in the building of power plants
and desalination plants. In that connection, he said he had
worked in Saudi Arabiafor many years in the past.
[12] In the spring of 1996, he was working
for Babcock & Wilcox on the construction of a plant in
Windsor, Ontario, when he was asked by his employer to work on a
contract in Egyptas a consortium site manager. After spending
four months on the Egyptian contract in the employer's office
in Canada, he left this country in September 1996 for Egyptand
returned to Canadain April 2000, when the contract was
completed.
[13] On August 6, 1996, the appellant signed
an employment agreement that was filed as Exhibit A-1, Tab 19. On
the agreement the space for the name of the employer is blank.
The first condition states that the term of the employment is for
an indefinite period. However, under the employer's
representative's signature, it is indicated that the date of
return will be in approximately four years.
[14] The same agreement stipulates that in
case of illness or injury the appellant will have coverage at
least equal to that provided by the Workers' Compensation
Act of the provinceof Ontario. The appellant also
acknowledged, in this agreement, his responsibility for payment
of income taxes for both Canadaand Egypt. He was, moreover,
subject to the employer's plan of tax equalization, which
attempted to provide, as far as practicable, that Canadian
expatriates pay neither a greater nor lesser tax as a result of
the employment abroad than if they had remained in Canada. Under
the terms of the agreement, the appellant was paid an
expatriation premium equivalent to 15 per cent of his base pay as
an allowance for accepting foreign duty. This premium was to be
paid for the duration of the foreign assignment. The agreement
also provided that the employer would furnish air transportation
for the appellant as follows: at the beginning of the contract,
from his home location to his new work location; during his
assignment, after 12 months, round-trip transportation to his
home location and back; and at the end of the contract,
transportation to his home location.
[15] The appellant also filled out for the
employer in July 1996 a questionnaire (Exhibit A-1, Tab 18) in
which he stated that the duration of the assignment in Egypt
would be 48 months. He indicated in the questionnaire that he
owned a house and a vacant land in Canada and that he would keep
his Canadian driving permit and was eligible for provincial
health insurance in Canada.
[16] At the hearing, the appellant said that
he and his wife owned a paternal house in Timmins, Ontario,
inherited from his wife's parents, who made them promise that
they would pass down the house to their own children. When he and
his wife left for Egypt, they did not lease the house. They owned
a lot of keepsakes (artefacts and mementos purchased in different
countries over the years) that they did not want to put in
storage. They left all their furniture in their house in Timmins.
They did not keep their telephone directory listing but the house
was protected with an alarm system that was hooked up to a phone
line in the house. The appellant and his wife had people who
would look after the house regularly. These people had a power of
attorney to pay the bills. There was someone who would cut the
grass in summer and someone who would shovel the snow in
wintertime. The mail was rerouted to the people looking after the
house.
[17] The appellant's wife, who moved
with her husband to Egypt, came back at least twice in the
summertime for a period of two to three weeks and stayed in their
house in Timmins. She said in her testimony that it was too hot
to stay in Alexandriain summer, where they rented a
semi-furnished apartment on a yearly basis. Before coming back to
Canadafor good, they sold whatever they had purchased for their
apartment in Alexandria.
[18] During his stay in Egypt, the appellant
did not really have a social life. He was working almost seven
days a week and spent his spare time with his wife. They have
three adult children who live in Canada and one of them went to
visit once during the assignment in Egypt. The appellant kept his
two Canadian bank accounts. His salary was deposited in one of
these accounts by his employer's Canadian branch. The
appellant said that this salary was, however, charged back to the
employer's branch in Egypt. (I note, however, that there is
no indication to that effect in the employment agreement (Exhibit
A-1, Tab 19), which does not even mention the name of the
employer.) All Canadian bills were paid through this Canadian
bank account. The appellant also had an expense account for work
and a personal account in Egypt in which he kept a very small
amount of money. He did not own a car there, as his employer
provided him with one, and he obtained his Egyptian driver's
licence in the fall of 1997. He himself did not own a car in
Canadabut his wife did and it was stored at the house in Timmins.
The car was insured for fire and theft but not for third party
liability. He also had a Registered Retirement Savings Plan
("RRSP"), credit cards and a safety deposit box in
Canada. While in Egypt, he received Canada Pension Plan and
Canadian Old Age Security payments (see tax returns filed for
1998 and 1999 in Exhibit A-1, Tabs 2 and 3). The
appellant always kept his Canadian passport and it is my
understanding that he did not ask for an Egyptian passport.
[19] The appellant filled out questionnaires
for the determination of residency status (Form NR73) for each
year he was abroad and these were filed with his tax returns in
Canada. In these questionnaires, he indicated that he was going
to live outside Canada for four years and that he would retire in
Canadaafter his assignment. He also indicated in the first
questionnaire (1996) that he would be maintaining eligibility for
provincial hospitalization and medical insurance coverage and at
the same time would have medical/hospitalization coverage abroad
provided by his employer (Exhibit A-1, Tab 14). In the other
questionnaires, he only indicated that he was covered under his
employer's insurance while living outside Canada(Exhibit A-1,
Tabs 15 and 16 and Exhibit A-2).
[20] The appellant did not recall coming
back to Canada during his stay in Egypt, but it seems from the
way he filled out the NR73 questionnaires that he returned to
Canada at least once for a period of 20 to 30 days (Exhibit A-1,
Tab 16).
[21] In April 2000, the employer closed down
its office in Egyptand the appellant did not look for another job
in that country but returned to Canada.
Analysis
I. Was the appellant ordinarily resident in
Canadaduring the relevant period?
[22] The leading case on the matter of the
residency of an individual for income tax purposes is the
decision of the Supreme Court of Canada in Thomson v.
M.N.R., [1946] S.C.R. 209. I will refer to some extracts from
this case that are relevant here. Estey J. defined the expression
"ordinarily resident" as follows at pages 231-32:
A
reference to the dictionary and judicial comments upon the
meaning of these terms indicates that one is "ordinarily
resident" in the place where in the settled routine of his
life he regularly, normally or customarily lives. One
"sojourns" at a place where he unusually, casually or
intermittently visits or stays. In the former the element of
permanence; in the latter that of the temporary predominates. The
difference cannot be stated in precise and definite terms, but
each case must be determined after all of the relevant factors
are taken into consideration, but the foregoing indicates in a
general way the essential difference. It is not the length of the
visit or stay that determines the question. . . .
It is well established that a person may have more than one
residence
. . . .
[23] Rand J., expressed himself as follows
at pages 224-25:
The expression "ordinarily resident" carries a
restricted signification, and although the first impression seems
to be that of preponderance in time, the decisions on the English
Act reject that view. It is held to mean residence in the course
of the customary mode of life of the person concerned, and it is
contrasted with special or occasional or casual residence. The
general mode of life is, therefore, relevant to a question of its
application.
For the purposes of income tax legislation, it must be assumed
that every person has at all times a residence. It is not
necessary to this that he should have a home or a particular
place of abode or even a shelter. He may sleep in the open. It is
important only to ascertain the spatial bounds within which he
spends his life or to which his ordered or customary living is
related. Ordinary residence can best be appreciated by
considering its antithesis, occasional or casual or deviatory
residence. The latter would seem clearly to be not only temporary
in time and exceptional in circumstance, but also accompanied by
a sense of transitoriness and of return.
But in the different situations of so-called "permanent
residence", "temporary residence", "ordinary
residence", "principal residence" and the like,
the adjectives do not affect the fact that there is in all cases
residence; and that quality is chiefly a matter of the degree to
which a person in mind and fact settles into or maintains or
centralizes his ordinary mode of living with its accessories in
social relations, interests and conveniences at or in the place
in question. It may be limited in time from the outset, or it may
be indefinite, or so far as it is thought of, unlimited. On the
lower level, the expressions involving residence should be
distinguished, as I think they are in ordinary speech, from the
field of "stay" or "visit".
[24] Accordingly, as suggested by counsel
for the appellant, the question is to determine where, during the
period at issue, the appellant, in his settled routine of life,
regularly, normally or customarily lived. One must examine the
degree to which the appellant in mind and fact settled into,
maintained or centralized his ordinary mode of living, with its
accessories in social relations, interests and conveniences, at
or in the place in question.
[25] This is mainly a question of fact. In
The Queen v. Reeder, 75 DTC 5160 (F.C.T.D.), referred to
by the appellant, the court listed some factors considered to be
material in determining the question of fiscal residence, at page
5163:
. . . While the list does not purport to be exhaustive,
material factors include:
a. past and present habits of life;
b. regularity and length of visits in the jurisdiction
asserting residence;
c. ties within that jurisdiction;
d. ties elsewhere;
e. permanence or otherwise of purposes of stay abroad.
The matter of ties within the jurisdiction asserting residence
and elsewhere runs the gamut of an individual's connections
and commitments: property and investment, employment, family,
business, cultural and social are examples, again not purporting
to be exhaustive. Not all factors will necessarily be material to
every case. They must be considered in the light of the basic
premises that everyone must have a fiscal residence somewhere and
that it is quite possible for an individual to be simultaneously
resident in more than one place for tax purposes.
[26] In his submissions, counsel for the
appellant put much reliance on the case of Bostonv. The
Queen, 98 DTC 1124 (T.C.C.). In that case, the taxpayer
resided in Canada until he moved to Malaysiain 1988 to take up a
new position with his employer. He left for Malaysiaalone, and
his wife, with whom he was having marriage difficulties, stayed
in their house in Edmonton, Alberta, with their son. The taxpayer
remained on his Canadian employer's payroll but his salary
was charged back to his employer in Malaysia. He moved into a
house owned by his employer, for which he was charged rent. He
purchased a car in Malaysiaand acquired a Malaysian driver's
license. He had real estate and other investments in Canada.
Although the original contract was for a minimum three-year
period, the taxpayer stayed in Malaysiafor his employer for seven
years. Judge Mogan of this Court concluded that the taxpayer was
not ordinarily resident in Canada. Judge Mogan considered the
decision by Judge Sarchuk of this Court in Ferguson v.
M.N.R., 89 DTC 634, in which the taxpayer went to Saudi
Arabiaunder a series of one-year contracts and was found to be
resident in Canada. In Boston, supra, Judge Mogan
distinguished Ferguson, supra, from the appeal
before him on the basis that (at page 1128):
. . . the Appellant went to Malaysia for a minimum period of
three years; he had significant employment responsibilities
there; he hoped to stay on after three years if he became manager
of the Port Dickson Refinery; and he became active in the
residential community of Port Dickson.
[27] The Boston case was considered
in McFadyen v. The Queen, 2000 DTC 2473 (T.C.C.), by Chief
Judge Garon and distinguished on the basis that in Boston
the taxpayer had spent more than six years abroad, while Mr.
McFadyen lived in Japan for only about three years. In
McFadyen, this Court came to the conclusion that the
taxpayer maintained ties with Canada that were largely economic
but partly personal (family ties, real property, furniture and
appliances, bank accounts, a safety deposit box, an RRSP, credit
cards, and a provincial driver's licence), and hence
considered him to have been ordinarily resident in Canada during
the period he was in Japan. The McFadyen decision was
confirmed by the Federal Court of Appeal (McFadyen v. The
Queen, 2003 DTC 5015).
[28] The appellant also referred to
Nicholson v. The Queen, 2004 DTC 2013 (T.C.C.), a case in
which the taxpayer was recruited by a corporation from the United
States to work in the United Kingdom ("UK") where he
was to take over the employer corporation's business
operations in Europe. The issue was whether the taxpayer was
resident in Canadaduring the period (1½ years) he lived in
the UK. The Court concluded that although he maintained his
participation in the provincial health program and kept the
matrimonial home, he was not a resident of Canadaduring that
period. The Court based its decision on the fact, among others,
that the taxpayer had no intention to return to Canada when he
accepted the position in the UK. He anticipated rather an
eventual move to the United States. He and his first wife were
separated and he kept his Canadian bank account from which he
made periodical payments to her. He lived with his new wife in
the UKwhere her child attended school.
[29] I find the Nicholson case to be
distinguishable from the present situation. Indeed, on the basis
of the above case law, I am of the view that the appellant was
ordinarily resident in Canadaduring the period at issue.
[30] As Rip J. said in his recent decision
in Snow v. Canada, [2004] T.C.J. No. 267
(Q.L.), at paragraph 18:
¶ 18 A person may be resident of more
than one country for tax purposes. The nature of a person's
life and the frequency he or she comes to Canada are important
matters to consider in determining one's residence. [See Note
2 below] The words "ordinarily resident" in s.s. 250(3)
refer to the place where, in the person's settled routine of
life, the person normally or customarily lives. [See Note 3
below] The intention of a taxpayer, while obviously relevant in
determining the "settled routine" of a taxpayer's
life, is not determinative. [See Note 4 below] A person's
temporary absence from Canada does not necessarily lead to a loss
of Canadian residence if a family household remains in Canada, or
possibly even if close personal and business ties are maintained
in Canada. [See Note 5 below]
_____________________________
Note 2: Thomson, supra, 213-4, per Kerwin, J.
[Thomson v. M.N.R., [1946] S.C.R. 209.]
Note 3: Thomson, supra, 231 per Estey, J.
Note 4: Peter W. Hogg, Joanne E. Magee and Jinyan Li,
Principles of Canadian Income Tax Law, 4th ed. p.p. 60-62,
Carswell: Toronto.
Note 5: Hogg, supra, p. 62.
[31] In the present case, I recognize that,
according to the evidence presented before me, the appellant did
not frequently come to Canadawhile he was working in Egypt.
However, it is clear from the evidence that the appellant and his
wife left Canadaon a temporary basis only.
[32] It is clear from the employment
agreement that the appellant was given an assignment in Egyptfor
which he was even paid an expatriation premium for the duration
thereof. The agreement provided for air transportation back and
forth between the appellant's home location and his work
location. The appellant kept all his assets in Canada and before
leaving Canada made all the necessary arrangements to have
someone look after those assets. His purpose in accepting the
contract in Egyptwas not to give up his ties with Canadabut
mainly to earn a living. The appellant agreed to go there on a
contractual basis and did not sever his attachments to, or his
links with, Canada. The appellant did not in mind and fact
abandon his general mode of life in Canada. As a matter of fact,
the house in Timminswas available at all times as a place in
which he could customarily live. To use the words of Rand J. in
the Thomson case, he and his wife maintained their
ordinary mode of living, with its accessories in social
relations, interests and conveniences, in Canada. If I may
distinguish the present case from the Boston case, the
duration of the contract here was a lot shorter and the appellant
did not demonstrate that he became active in the community in
which he lived in Egypt. He was only there to do his work.
Finally, the Boston case was considered but not followed
in the McFadyen case, which was affirmed by the Federal
Court of Appeal.
[33] I adopt the reasoning of Mahoney J. in
the Reeder case, at page 5163:
The Defendant was at a stage in life when he was highly mobile.
He was able, willing, even eager, to travel. In that, he was not
atypical of his contemporaries and the relevant factors must be
considered in that context. It is not contested that he was,
before March 29, 1972 and has, since December 1, 1972, been
resident in Canada. Throughout, his ties of whatever description
have all been with Canada, save only those ties, undertaken
during the term of his absence, which were necessary to permit
him and his family to enjoy an acceptable and expected lifestyle
while in France. That absence was temporary even though, strictly
speaking, indeterminate in length. The ties in France were
temporarily undertaken and abandoned on his return to Canada.
I
am satisfied that had the Defendant been asked, while in France,
where he regularly, normally or customarily lived, Canada must
have been the answer. I find that the Defendant was resident in
Canadathroughout all of 1972.
[34] In my view, the same can be said here.
Throughout his sojourn in Egypt, the appellant's ties were
all with Canada, save only those ties, undertaken during the term
of his absence, which were necessary to permit him and his wife
to enjoy an acceptable and expected lifestyle while in Egypt. As
a matter of fact, the ties in Egypt were temporarily undertaken
and abandoned on his return to Canada. As Rip J. stated in the
above cited passage from Snow, supra, a
person's temporary absence from Canadadoes not necessarily
lead to a loss of Canadian residence when close personal and
economic ties are maintained in Canada. I therefore conclude that
the appellant was ordinarily resident in Canadaduring the years
at issue.
II. Tie-breaker rules: Article 4(2) of the
Convention
[35] The appellant having been a resident of
Canada and of Egyptduring the period at issue, the tie-breaker
rules of Article 4 of the Convention, referred to previously in
these reasons, must be considered.
[36] The parties do not dispute the fact
that the appellant had a permanent home available for use in both
countries. Under paragraph 2 of Article 4 of the Convention,
since he had a permanent home available to him in both states, he
shall be deemed to have been a resident of the state with which
his personal and economic relations (centre of vital interests)
were closer during the relevant period.
[37] The OECD Model Tax Convention on
Income and on Capital has received worldwide recognition as a
basic reference document in the application and interpretation of
tax conventions (see The Queen v. Crown Forest Industries
Limited et al., 95 DTC 5389 (S.C.C.), at page 5398). In its
condensed version of January 28, 2003, it is stated in
paragraph 15 of the "Commentary on Article 4" that:
15. If the individual has a
permanent home in both Contracting States, it is necessary to
look at the facts in order to ascertain with which of the two
States his personal and economic relations are closer. Thus,
regard will be had to his family and social relations, his
occupations, his political, cultural or other activities, his
place of business, the place from which he administers his
property, etc. The circumstances must be examined as a whole, but
it is nevertheless obvious that considerations based on the
personal acts of the individual must receive special attention.
If a person who has a home in one State sets up a second in the
other State while retaining the first, the fact that he retains
the first in the environment where he has always lived, where he
has worked, and where he has his family and possessions, can,
together with other elements, go to demonstrate that he has
retained his centre of vital interests in the first State.
[38] Thus, if a person who has a home in one
state sets up a second in the other state while retaining the
first, the fact that he retains the first in the environment
where he has always lived, where he has worked, and where he has
his family and possessions, can, together with other elements, go
to demonstrate that he has retained his centre of vital interests
in the first state.
[39] Here, it is true that the appellant
said that he had worked abroad for a number of years during his
career, but it is my understanding that it was in circumstances
similar to those that took him to Egypt. He and his wife always
kept their house and all their possessions in Canada. Their
family always lived in Canada. It is my perception that they
never intended to give up their economic and personal relations
with Canada. In fact, the appellant did not really maintain any
economic relations with Egyptapart from those he needed to have
in order to meet his day-to-day living expenses. He
rented an apartment there on a yearly basis, kept a bank account
solely for his needs over there, did not purchase a car, and
obtained his driver's licence simply so as to be able to
commute to work in Egypt. That the appellant agreed to work in
Egypt on an approximately four-year contract does not alter the
fact that his centre of vital interests remained in Canada.
[40] I therefore conclude, considering all
the facts, that the appellant's centre of vital interests was
closer to Canada than Egypt during the years 1996, 1998 and
1999.
[41] The appellant was therefore taxable in
Canadaon his income from sources inside and outside Canada. He
was granted a foreign tax credit under section 126 for 1998 and
1999. As conceded by the respondent, he is entitled as well to a
foreign tax credit of $7,379 for 1996.
[42] The appeal for the 1996 taxation year
is therefore allowed and the assessment is referred back to the
Minister for reconsideration and reassessment on the basis that
the appellant is entitled to a foreign tax credit of $7,379
pursuant to section 126 of the Act.
[43] The purported appeal for the 1997
taxation year is quashed.
[44] The appeals for the 1998 and 1999
taxation years are dismissed with costs to the respondent.
Signed at Ottawa, Canada, this 22nd day of December 2004.
Lamarre, J.
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