30 August 2002 External T.I. 2002-0147045 - Immigrantion; General tax issues

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: General questions on application of Singapore tax convention.

Position: Singapore convention applies in usual way to income taxes in year of immigration to Canada (the taxpayer will be a part-year resident).

Reasons: n/a

XXXXXXXXXX 	2002-014704
		Eliza Erskine
August 30, 2002

Dear XXXXXXXXXX:

Re: Proposed Immigration to Canada from Singapore - General Questions Regarding the Canada-Singapore Income Tax Convention (the "Convention")

This is in reply to your letter of June 24, 2002, requesting information on some of the tax implications of your proposed immigration to Canada either later this year or in early 2003. In particular, you have requested that we respond to the following questions:

1. Does the Convention apply to personal income tax?

2. Does the Convention apply such that once you pay Singapore income tax you are "waived from paying" Canadian income tax?

3. If the answer to question 2 is no, do you have to pay the difference between Canadian and Singapore taxes to Canada, assuming that Canadian tax rates are higher?

4. From a tax perspective, does it simplify matters if you arrive in Canada after December 31, 2002?

5. If you come to Canada in, for example, September 2002 to attend to preliminary matters and then return to Singapore shortly afterward (within a month or so) prior to leaving Singapore for Canada for good, will you be subject to Canadian income tax immediately following your first visit to Canada in September 2002 or not until you arrive in Canada with the intention of staying permanently?

6. How does the Convention affect the answer to question 5?

Our Comments

The circumstances outlined in your letter relate to a specific, proposed fact situation. We note that written confirmation of the tax implications arising out of a proposed fact situation are given by this Directorate only where the circumstances or events are the subject matter of an advance income tax ruling request. For information regarding applying for an advance income tax ruling, please refer to our Information Circular 70-6R4, Advance Income Tax Rulings, which can be obtained from our website at www.ccra-adrc.gc.ca . Income tax ruling requests are subject to an hourly fee and are handled by our Directorate on a priority basis. Our Directorate also provides non-binding technical interpretations at no charge with respect to hypothetical scenarios. We do not provide information in the nature of tax advice, however. As a result, we cannot give you a detailed response to your questions, and we advise you to consult with a Canadian tax professional. We can offer the following general comments, however, which may be helpful to you.

Question 1

The Convention applies to all types of income tax imposed by Canada and Singapore. For purposes of the Convention, income tax includes personal income tax and, for greater certainty, includes taxes imposed on capital gains.

Question 2

The Convention applies to persons who are residents of either Canada or Singapore or of both Canada and Singapore. If the Convention applies to you, only one of Canada or Singapore will have primary taxing jurisdiction. This means that, generally, only one of Canada or Singapore will be entitled to tax you on your worldwide income. The other country will generally only be entitled to tax you on income sourced in that country (for example, employment income earned in that country or investment income arising in that country) and that tax may be limited by the Convention.

The country where you are resident for purposes of the Convention will have primary taxing jurisdiction. If you are resident in both countries under the applicable domestic laws of Canada and Singapore, then your residence status for purposes of the Convention will be determined by the "tie-breaker rules" found in Article IV of the Convention. For a general discussion of the standard "tie-breaker rules" found in Article IV of most of Canada's income tax conventions with other countries (including Singapore), please refer to Interpretation Bulletin IT-221R3, Determination of an Individual's Residence Status ("IT-221R3") which can be obtained from our website at www.ccra-adrc.gc.ca under income tax technical publications. This interpretation bulletin also provides a detailed discussion of how residence status is determined for Canadian tax purposes. We strongly recommend that you consult this publication and then contact the International Tax Services Office (ITSO) with any further questions regarding your tax obligations upon immigrating to Canada. Contact information for ITSO can be found toward the end of IT-221R3. Generally, an income tax convention does not "waive" payment of income taxes in either of the contracting states, although there are a few exceptions (for example, most income tax conventions have special rules for employees of one country who perform functions of a governmental nature in the other country).

Question 3

If you are determined to be resident in Canada for purposes of the Convention then, generally, you will be subject to full Canadian income tax on your worldwide income and you will be allowed a foreign tax credit (FTC) with respect to any Singapore income tax that you are required to pay on Singapore source income. If Canadian tax rates are higher than Singapore tax rates then yes, you will still be required to pay the "differential" between the tax rates even if you are required to pay certain Singapore income taxes. If you are determined to be resident in Singapore for purposes of the Convention, then you will generally only be subject to Canadian income tax on Canadian source income and only to the extent described in the Convention.

Question 4

Generally, the actual date that you become resident in Canada during a particular year does not affect your tax liability. There are special tax rules for immigrants to and emigrants from Canada, as these persons are "part-year residents", that is, persons who are resident for part of the year and non-resident for the other part of the year. If you become resident in Canada on or before December 31, 2002, then you will be required to file a Canadian tax return based on worldwide income for the time in 2002 that you were resident in Canada. This tax return would generally be due on or before April 30, 2003. Please contact ITSO for further information or to discuss the tax implications of your particular immigration situation. Please note that the Canada Customs and Revenue Agency does not provide tax advice, although we will respond to any questions you may have concerning Canadian tax liability and filing requirements. For general tax information as well as access to a collection of useful pamphlets and guides designed specifically for persons immigrating to Canada, please visit our website at www.ccra-adrc.gc.ca and follow these links found on the left side of the web-page: "Tax", "International and Non-Resident", "Individuals", and finally "Newcomers to Canada". We refer you in particular to pamphlet T4055, Newcomers to Canada.

Question 5

The date that you become resident in Canada for Canadian tax purposes and for purposes of the Convention is a question of fact that can only be determined based on all of the circumstances of your particular situation. Please refer to IT-221R3 (see above) for further information on determining residence status. You should also complete Form NR74, which can be obtained from our website at www.ccra-adrc.gc.ca, to assist you in determining your residence status. We suggest that you contact ITSO to discuss completing and sending in Form NR74.

Question 6

The "tie-breaker rules" of the Convention may affect the date that you become liable to full Canadian taxation because of a special provision in Canadian tax law that says that if you are found to be resident in a country other than Canada for purposes of an income tax convention then you are deemed not to be resident in Canada. Generally, this means that you will become liable to Canadian tax on your worldwide income on the later of the dates on which you are determined to be

(a) resident in Canada for purposes of Canadian tax law, and

(b) not resident in a country other than Canada for purposes of an income tax convention between Canada and that country.

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 and Trusts Division of this Directorate. Questions regarding administrative procedures, as well as requests for non-binding residence status determinations, should be directed to ITSO or to your local Tax Services Office (once you are in Canada).

Yours truly,

Jim Wilson
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch