6 January 2004 External T.I. 2003-0053525E5 - Residence Determination - Immigration Status

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: Would an individual be resident for tax purposes if his only ties to Canada were: (1) Canadian employer plus permanent residence under Immigration Act or (2) Canadian employer plus permanent residence under Immigration Act plus one child at university in Canada?

Position: (1) Probably not. (2) Maybe.

Reasons: Insufficient ties to Canada. Immigration status not determinative.

XXXXXXXXXX 	2003-005352
		Eliza Erskine
January 6, 2004

Dear XXXXXXXXXX:

Re: Determination of Residency for Income Tax Purposes

This is in reply to your letter of December 17, 2003, asking us to comment on whether an individual who is a permanent resident of Canada for purposes of the Immigration and Refugee Protection Act, 2001 (the "IRPA") would be a resident of Canada for tax purposes under the circumstances set out in two hypothetical fact situations.

Our Comments

Whether or not an individual is resident in Canada during a taxation year and, therefore, subject to Canadian income tax on his worldwide income for that year, is a question of fact to be determined by reference to all of the circumstances of the individual's particular situation. If you have not done so already, we suggest that you refer to Interpretation Bulletin IT-221, Determination of an Individual's Residence Status, which can be found on the CCRA website at www.ccra-adrc.gc.ca . It is not the policy of the Income Tax Rulings Directorate to comment on the residency status of a specific individual for a particular taxation year. It is possible, however, to obtain a residency determination from the International Tax Services Office (ITSO). For further information on determining the residence status of a particular individual, please call the ITSO, Enquiries & Adjustments Division, at 1-800-267-5177 (toll free anywhere inside Canada or the United States), (613) 952-3741 (English), or (613) 954-1368 (French), or write to:

International Tax Services Office
Enquiries & Adjustments Division
2204 Walkley Road,
Ottawa, ON
Canada, K1A 1A8

We have the following general comments with respect to the hypothetical situations you have outlined:

Situation 1: Spouse and Children All Living Outside Canada

In this situation, the individual and his spouse and children are all living outside Canada. The individual works outside Canada for a Canadian employer. He is a permanent resident of Canada for purposes of the IRPA. The individual has no ties to Canada other than those mentioned above, which are the individual's IRPA residence status and the individual's full-time employment outside Canada with a Canadian employer.

In our view, neither the individual's IRPA residence status nor the individual's employment status, in and of themselves, would make the individual a resident of Canada for tax purposes. Moreover, it is unlikely, absent any other residential ties to Canada, that these two ties taken together would be sufficient to make the individual a resident of Canada for tax purposes. However, the nature of the employment could be relevant in making a final residence determination. For example, if the individual were employed with the government of Canada or a province, or employed by the armed forces, this would strengthen the importance of his employment as a residential tie to Canada. Also, the residential ties to Canada of the individual's spouse could be relevant to the individual's residence determination, especially if the spouse owned or rented a dwelling place in Canada. Such a dwelling place would generally be considered to be a home in Canada that was available to the individual and thus would be a residential tie to Canada (notwithstanding legal ownership). However, the residence of the individual's spouse for Canadian tax purposes would not be determinative, in and of itself, of the individual's residence for Canadian tax purposes.

As a final comment, we note that if the individual is living in a country with which Canada has a tax treaty (the "treaty country"), then even if the individual is determined to be factually resident in Canada for tax purposes under the facts set out in Situation 1, it is likely that the individual would be found to be resident in the treaty country for purposes of the tax treaty. In that case, the individual would be deemed to be a non-resident of Canada pursuant to subsection 250(5) of the Income Tax Act (the "Act"). Interpretation Bulletin IT-221 provides a brief discussion of subsection 250(5) of the Act and the Residence Article of Canada's tax treaties.

Situation 2: Child Residing in Canada to Attend University

Situation 2 is the same as Situation 1 except that the individual has a child who is living in Canada because he is attending a Canadian university. We assume, in reviewing Situation 2, that the child is a dependent of the individual for purposes of the Act.

The individual in Situation 2 may have sufficient ties to Canada to be considered a factual resident of Canada. In most circumstances, the Canada Customs and Revenue Agency (the "CCRA") considers a spouse or a dependent child to be a significant residential tie to Canada such that the individual is a factual resident of Canada. In the Shih decision of the Tax Court of Canada (2000 DTC 2072), the Court found that the appellant was not a factual resident of Canada for tax purposes even though his spouse and dependent children resided in Canada. However, the facts of Shih are distinguishable from the facts of Situation 2 because, among other things, the taxpayer in the Shih case did not have a Canadian employer (Mr. Shih's permanent residence status under the Immigration Act did not depend on having a Canadian employer, notwithstanding that he was out of the country for the great majority of each of the taxation years in question). We would strongly encourage the individual in Situation 2 to complete a Form NR73 as it is quite possible that once the CCRA had a complete understanding of all of the facts the individual would be considered to be resident in Canada.

Even if the individual is considered to be factually resident in Canada for tax purposes, if the individual is living in a treaty country then it is likely on the facts of Situation 2 that he will be found to be resident in the treaty country for treaty purposes and consequently he will be a deemed non-resident of Canada pursuant to subsection 250(5) of the Act. Again, we suggest referring to Interpretation Bulletin IT-221 for more information on determining an individual's residence status for purposes of a tax treaty.

We trust that our comments will be of assistance to you.

Yours truly,

Jim Wilson, Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate