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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Are individuals deemed to be resident under paragraph 250(1)(a) able to rely on the coming into force rules for subsection 250(5)?
Position: No.
Reasons: The law.
XXXXXXXXXX 2000-002670
Attention: XXXXXXXXXX
December 11, 2000
Dear Sirs:
Re: Deemed Residents and Deemed Non-Residents
This is in response to your letter of April 28, 2000, wherein you requested our opinion on the application of subsection 250(5) of the Income Tax Act ("the Act").
In your letter you describe a situation where an individual sojourned in Canada for 183 days or more in each of 1997, 1998 and 1999 such that the particular individual was deemed to be resident in Canada for each of those years pursuant to paragraph 250(1)(a) of the Act. You indicate that the particular individual was also a resident of a country other than Canada for each of those years under a "tax treaty" as that term is defined in subsection 248(1) of the Act.
You note that, subject to the application of the "coming into force rule" for subsection 250(5) of the Act, subsection 250(5) will deem a person to not be resident in Canada at a time if, at that time, the particular person is, under a tax treaty with another country, resident in that other country. Under the coming into force rule it is your understanding that subsection 250(5) will not apply to deem an individual to not be a resident of Canada where that individual was resident both in Canada and another country under a tax treaty on February 24, 1998. In that situation subsection 250(5) will not apply until the first time after February 24, 1998 that that individual's residency status under the particular tax treaty changes. Therefore, you believe that the above described individual would continue to be considered a resident of Canada under the Act for the 1998 taxation year and any subsequent taxation year as long as that individual's residency status under the particular tax treaty does not change.
Notwithstanding the above, you note that the discussion of deemed residents on page 4 of the 1999 version of T4058 - Non-Residents and Income Tax (the "Guide") creates some uncertainty. On page 4 of the Guide it states:
"You were also a deemed resident of Canada for tax purposes in 1999 if you did not have residential ties in Canada, but you stayed here for 183 days or more in 1999 and you were not considered a resident of another country for the purposes of a tax treaty."
You indicate that the above comment in the Guide implies that if an individual was also a resident of another country under a tax treaty the individual would not be considered a resident of Canada. If this is correct, then it appears that the coming into force rule would not apply to the sojourning individual described above.
You ask that we clarify the operation of the coming into force rule based on the above comment in the Guide.
For the coming into force rule to apply on February 24, 1998 an individual must have been both a resident of Canada and a resident of another country with which Canada has a tax treaty under paragraph 1 of the Residence Article and pursuant to the "tie breaker" rules in that particular tax treaty such that the individual was determined to be only resident of the other country for the purposes of the tax treaty at that time.
While an individual is deemed to be resident in Canada throughout a year under paragraph 250(1)(a) of the Act, it is our view that for the purposes of applying the coming into force rule on February 24, 1998 an individual would not, at that particular time, be considered resident in Canada (i.e., the 183 day or more test will not be met on February 24, 1998) nor would the "tie breaker" rules in that particular tax treaty apply at that particular time to such an individual. Therefore, the comment in the Guide is correct and the coming into force rule will not apply to the sojourning individual described in the above situation. As a result, subsection 250(5) will apply to deem such an individual to not be a resident of Canada.
Our comments are provided in accordance with the practice described in paragraph 22 of IC-70-6R3.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 4 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000