Marin – Tax Court of Canada confirms that FTC domestic and Treaty provisions are applied re the particular year in which the subject income was earned

France started imposing income tax on rental income as it was earned rather than the tax being payable one year in arrears, as previously. However, the taxpayer (a Canadian resident with a French rental property), like others, was granted transitional relief so that in 2019 he received a tax credit from the French government equal to the French tax otherwise payable by him on his 2018 income – so that in 2019 he only had to pay the current tax on his 2019 rental income.

He nonetheless argued in Tax Court that he should be entitled to a foreign tax credit (“FTC”) for French income tax on the rental income for his 2018 taxation year (which clearly was subject to Canadian income tax) on the grounds that he was continuing throughout to pay French income tax on an annual basis.

In rejecting this and another argument, Lafleur J confirmed:

• The reference in s. 126(1) to an FTC for non-business income tax paid “for the year” refers to the taxation year (2018) in which the income was earned giving rise to the Canadian tax for which the FTC is claimed (he paid no net French tax for 2018).
• The statement in Art. 6 of the Treaty that "[i]ncome from immovable property ... may be taxed in the Contracting State in which such property is situated" did not accord an exclusive right on France to tax his French rental income, so that Canada was not precluded from taxing it.
• Art. 23 only dealt with issues of double taxation for income, and there was no double taxation of his rental income for 2018.

Neal Armstrong. Summaries of Marin v. The Queen, 2022 CCI 49 under s. 126(7) – non-business income tax, Treaties – Income Tax Conventions, Art. 6, Art. 24.