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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: What impact does location of storage of personal belongings have on residence determination?
Position: This is a minor tie, and unlikely to "make or break" any residence determination, whether for national or provincial residence purposes.
Reasons: This kind of tie is only significant when taken together with other residential ties. Generally, we'd look at where the most significant residential ties were to determine provincial residence. Usually, a person leaving Canada on a work assignment will be resident for provincial tax purposes in the province that they left from.
XXXXXXXXXX 2002-013900
Eliza Erskine
May 15, 2002
Dear XXXXXXXXXX:
Re: Impact of Location of Storage Services on Residence Determination
This is in reply to your facsimile of May 6, 2002, in which you asked us to explain what impact the location of the storage of a person's effects could have on the determination of that person's residence status for tax purposes. In particular, you are concerned that certain of your clients believe that by putting their personal effects in long-term storage at your warehouse facility in XXXXXXXXXX, Quebec (the "Quebec Warehouse"), while outside Canada, they are adversely affecting the amount of tax that they will be required to pay while abroad because of the weight that the Canada Customs and Revenue Agency (the "CCRA") will place on the location of their personal effects in determining their residence status. We assume that the issue has arisen primarily because of the discrepancy between provincial income tax rates in Ontario and Quebec.
In your facsimile, you refer to our publication, Interpretation Bulletin IT-221R3, Determination of an Individual's Residence Status ("IT-221R3"). Generally, the CCRA considers the factual criteria set out in IT-221R3 to determine residence status for both federal and provincial tax purposes, although the bulletin was written specifically to address issues relating to determining residence status for federal income tax purposes. At the present time, there are no specific written guidelines published by the CCRA on how to determine residence status for provincial income tax purposes, however, it is our position that the criteria set out in paragraphs 4 to 9 of IT-221R3 are applicable to provincial residence determinations. As a matter of practice, the CCRA has applied these criteria to determinations of provincial residence status for many years, although the issues are not quite as straightforward with respect to individuals who have physically left Canada while remaining "ordinarily resident" in Canada for federal tax purposes.
As indicated in IT-221R3, whether or not an individual is "ordinarily" - that is, factually - resident in Canada depends on the particular situation and circumstances of that individual. Generally, an individual will be factually resident in Canada if they maintain any significant residential ties with Canada while abroad. An individual's primary residential ties - ties that will be considered to be significant for the purpose of determining residence status except in very rare cases - are his or her home, spouse or common-law partner, and dependants. Other residential ties, such as the location of stored personal effects, are generally less important than the primary ties, and usually will only be significant when taken together with other residential ties or factors such as intention to return to Canada. The CCRA considers that an individual's ongoing employment with a Canadian employer (especially where the employer is the government of Canada or a province), will generally be a significant tie to Canada, although such employment will not by itself result in an individual being determined to be resident in Canada.
As discussed above, an individual's residence status for provincial income tax purposes is generally determined by taking into account the same residential ties that are referred to in determining residence status for federal income tax purposes. Also, the significance (that is, the weight) to be given to any one residential tie will usually be the same for both provincial and federal income tax purposes.
Generally, an individual who is physically residing in Canada at the end of a calendar year will have little difficulty in determining his or her province of residence at that time. Where the individual has residential ties to more than one province - which will be more common for individuals living and working near provincial borders - the CCRA will consider the individual to be resident for provincial tax purposes in the province with which he or she has the most significant residential ties, in accordance with section 2607 of the Income Tax Act Regulations ("Regulation 2607").
It can be more difficult - as a practical matter - to determine an individual's province of residence for provincial tax purposes where the individual is physically outside Canada at the end of the calendar year (while still remaining factually resident in Canada). This is especially true if the individual's spouse, common-law partner, and dependants are living with the individual abroad. We understand from your facsimile that this is the situation that is of particular concern to you and your clients. Generally, it is our view that an individual who is determined to be factually resident in Canada for federal income tax purposes while living abroad, is likely to be resident for provincial tax purposes, while living abroad, in the province in which he or she physically resided prior to leaving Canada. This is a result of the fact that an individual is most likely to have his or her provincial health insurance, driver's license, bank account, safety deposit box and so on, in the province in which he or she was last physically present. As well, it would be usual for any personal effects such as clothing, furniture and recreational vehicles to be stored in the province from which the individual and his or her family left Canada. However, as discussed above, an individual's residence status with respect to a particular province is a question of fact and the significance of any one of the individual's residential ties to a province must be considered, along with any intention (or requirement) to return to that particular province after the individual's stay abroad, in determining that residence status.
With respect to your particular concern, the CCRA does not consider the location of the storage of personal effects to be a significant residential tie to a particular province in the absence of other residential ties. This means that if an individual has maintained residential ties to Ontario while abroad, such as health insurance, a provincial driver's license, vehicle registrations, bank accounts, investment properties, social ties and so on, and if the individual's employer is located in Ontario and the individual expects to resume work in Ontario upon returning to Canada, then the fact that he or she stores certain personal effects in the Quebec Warehouse is unlikely, in our opinion, to make the individual resident in Quebec for provincial tax purposes. However, Quebec administers its own provincial income tax system in accordance with its own income tax legislation, and although it is our understanding that Revenue Quebec determines residence status by reference to factors similar to those discussed in IT-221R3, there may be some differences in how residence status is determined for Quebec income tax purposes by virtue of specific provisions in the Quebec income tax legislation. Accordingly, we suggest that you contact Revenue Quebec in order to determine how the location of stored personal effects might affect a determination of residence status under the Quebec income tax legislation.
We trust that our comments will be of assistance to you. If you have further interpretative issues regarding residence status determinations, or if you have comments or questions with respect to IT-221R3, please write to the International & Trusts Division of this Directorate. Questions regarding administrative procedures, as well as applications for non-binding residence status determinations (Form NR73), should be directed to the International Tax Services Office (see IT-221R3 for contact information).
Yours truly,
Jim Wilson
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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