3 August 2004 External T.I. 2004-0057301E5 - Dual residency - provinces

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.

Principal Issues: Whether the province of residence of an individual is affected when the individual has a spouse and another dwelling in a second province?

Position: Yes

Reasons: Question of facts

XXXXXXXXXX 2004-005730
Fouad Daaboul
August 3, 2004

Dear XXXXXXXXXX:

Re: Determination of Province of Residence for Personal Income Tax Purposes

This is in reply to your e-mail of January 19, 2004, wherein you requested our views on the above-noted issue with respect to your personal situation described hereafter.

Facts

You currently reside in the city of XXXXXXXXXX and you pay your personal income taxes as a resident of Ontario. Since XXXXXXXXXX, your ties to Ontario are substantial; in addition to spending considerable time in Ontario, you are covered by the Ontario provincial health plan, your car is registered and insured in Ontario, your bank accounts are in Ontario, you lease an apartment in XXXXXXXXXX where you have shared custody of your daughter, you do consulting in XXXXXXXXXX and you own and operate a federally-incorporated business which is headquartered in XXXXXXXXXX.

You also mention that you are a tenured full-time faculty member of the XXXXXXXXXX. You work roughly once a week in XXXXXXXXXX, spending a few nights there before returning to your home in XXXXXXXXXX. You rent no living space in XXXXXXXXXX, and you do not own real estate in the province of Quebec. You do not contribute to the QPP, nor do you have any bank account in XXXXXXXXXX.

You are planning to marry a resident of XXXXXXXXXX in XXXXXXXXXX. While your wife will continue to live primarily in XXXXXXXXXX, you do not expect that the amount of time you will spend in XXXXXXXXXX or in XXXXXXXXXX will change. However, you may decide to buy or lease a larger residence in XXXXXXXXXX, which might be in your name or jointly with your fiancée's name. She is similarly considering whether to buy or lease a larger residence in XXXXXXXXXX that might be in her name or jointly in both your name and hers.

Question

As we understand your question, the issue is whether, in the circumstances described above, the potential changes in your personal status and your housing arrangements would impact on your province of residence.

Our comments

Since the particular situation outlined in your letter relates to a factual one, involving a specific taxpayer, we are unable to provide you with a definitive answer to your question without having had the opportunity to review all the facts and related documentation. Such a review is conducted by the relevant tax services office where the query relates to a completed transaction, or by this directorate where the arrangement is the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings. We are nevertheless prepared to offer the following general comments which may be of assistance. Since these comments are general in nature, they may or may not apply to your situation and are not binding on the Canada Revenue Agency.

Our general position in respect of the determination of an individual's residence are expressed in Interpretation Bulletin IT-221R3, in which we said that many of the comments formulated in this bulletin apply to determinations of residence status for provincial as well as federal tax purposes. An individual is considered to be resident in a particular province where he or she has significant residential ties. Although in some cases an individual could be considered to be resident in more than one province on December 31 of a particular taxation year, for the purposes of computing his or her provincial tax payable, such an individual would be considered to be resident only in the province where he or she has the most significant residential ties. Section 2607 of the Income Tax Regulations provides that in cases of dual provincial residence, the dual-resident individual is resident, for purposes of computing his or her income earned in a province, "in that province which may reasonably be regarded as his principal place of residence".

The residence status of an individual can only be determined on a case-by-case basis after taking into consideration all of the relevant facts. In this regard, paragraph 5 of IT-221R3 states that:

"[t]he residential ties of an individual that will almost always be significant residential ties for the purpose of determining residence status are the individual's

(a) dwelling place (or places),
(b) spouse or common-law partner, and
(c) dependants."

Paragraph 7 of IT-221R3 goes on to say:

"If an individual who is married or cohabiting with a common-law partner leaves Canada, but his or her spouse or common-law partner remains in Canada, then that spouse or common-law partner will usually be a significant residential tie with Canada during the individual's absence from Canada. Similarly, if an individual with dependants leaves Canada, but his or her dependants remain behind, then those dependants will usually be considered to be a significant residential tie with Canada while the individual is abroad..."

Generally, secondary residential ties must be looked at collectively in order to evaluate the significance of any one such tie; therefore, it would be unusual for a single secondary residential tie with a province to be sufficient in and by itself to lead to a determination that an individual is factually resident in this province while in another province. Secondary residential ties are listed in paragraph 8 of IT-221R3 and include vehicle registration, social ties, medical coverage, economic ties and personal properties.

We assume that, in your current situation, you are resident in the province of Ontario since that is where your significant residential ties, i.e. a dwelling place and a dependant child, are located. However, you may also be considered as a resident of the province of Quebec if, on December 31 of the 2004 taxation year, you have another dwelling place in XXXXXXXXXX and your spouse resides in XXXXXXXXX . In this case, your province of residence must be the province in which you have the most significant residential ties. If the province in which you have the most significant residential ties cannot be determined, then your province of residence must be the province in which you have the most secondary residential ties.

We trust our comments will be of assistance.

Yours truly,

Eric Allard-Pouliot
Acting Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Planning Branch

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