2004 Ruling 2004-0083621R3 - Residency Determination

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 taxpayer is a resident of Canada for the purposes of the Income Tax Act and the Canada-United States Income Tax Convention?

Position: Yes.

Reasons: He has significant ties in Canada and his centre of vital interests is in Canada.

XXXXXXXXXX 2004-008362

XXXXXXXXXX, 2004

Dear XXXXXXXXXX:

Re: XXXXXXXXXX (Mr. X)

Advance Income Tax Ruling

We are writing in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-referenced taxpayer.

Mr. X's tax affairs are administered by the XXXXXXXXXX Tax Services Office and he files his tax returns at the XXXXXXXXXX Taxation Centre under Social Insurance Number XXXXXXXXXX.

To the best of your knowledge and that of the taxpayer involved, none of the issues involved with this request:

(i) is involved in an earlier return of the taxpayer or a related person;

(ii) is being considered by a tax services office or a taxation centre in connection with a tax return already filed by the taxpayer or a related person;

(iii) is under objection; or

(iv) is before the courts or, if a judgement has been issued, the time limit for appeal has not expired.

Definitions

In this letter the following terms have the meanings specified:

(a) "Act" means the Income Tax Act R.S.C. 1985 c.1 (5th Supp.), as amended to the date hereof, and unless otherwise stated, every reference herein to a Part, section, subsection, paragraph or subparagraph is a reference to the relevant provisions of the Act;

(b) "Holdco" means XXXXXXXXXX, a private Canadian corporation;

(c) The "Treaty" refers to the Canada-United States Income Tax Convention (1980);

(d) "Xco" means XXXXXXXXXX, a Canadian private corporation;

(e) "Yco" means XXXXXXXXXX, a U.S. corporation; and

(f) "Zco" means XXXXXXXXXX, a Canadian private corporation.

Facts:

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

1. Mr. X is a Canadian citizen resident in Canada.

2. He was born in Canada and has lived in Canada for most of his life.

3. Mr. X owns his personal residence at XXXXXXXXXX.

4. Mr. X is not married and does not have any children. He does not have a common-law partner. His immediate family, consisting of his parents, siblings, nieces and nephews, all live in XXXXXXXXXX.

5. Mr. X is employed in Canada with Xco, a Canadian private corporation, in the position of XXXXXXXXXX.

6. Mr. X owns all of the outstanding shares of Holdco, a private Canadian corporation.

7. Holdco owns investment assets and XXXXXXXXXX% of the common shares of Zco, a Canadian private corporation. The remaining shares of Zco are owned (directly or indirectly) by other members of the XXXXXXXXXX family.

8. Zco owns all of the outstanding shares of Xco and Yco. Yco is a U.S. corporation. Xco and Yco carry on directly or through subsidiaries an active business in the XXXXXXXXXX business in Canada and the U.S. respectively.

9. Mr. X is a member of the following clubs and associations:

XXXXXXXXXX.

10. In addition to his investment in Holdco, Mr. X has investments and bank accounts in Canada with the following institutions:

XXXXXXXXXX.

11. Mr. X has medical coverage with XXXXXXXXXX, which he will continue to be covered by during his transfer.

Proposed Transactions

12. Mr. X will accept a temporary employment transfer within Xco (the "Assignment") and move to the U.S. for a period of XXXXXXXXXX years.

13. Mr. X will rent accommodation in the U.S. for the duration of the Assignment.

14. Mr. X will move back to Canada at the end of the Assignment.

15. Mr. X will make trips back to Canada for both business and personal reasons while he is away. It is anticipated that Mr. X will return to Canada at least XXXXXXXXXX times per year.

16. It is anticipated that he will spend approximately XXXXXXXXXX% of his time in Canada. However, it is not anticipated that Mr. X will stay in Canada for more than 183 days in a calendar year during the Assignment.

17. Mr. X will maintain his principal residence in Canada during the Assignment; he will not rent out the property and it will be available for his use whenever he visits or returns to Canada.

18. Mr. X will not move his furniture to the U.S.

19. Mr. X will redirect his mail from his personal residence to an office of Xco in Canada while he is in the U.S.

20. Mr. X will retain his investments and bank accounts and his shares in Holdco.

21. Mr. X will retain his memberships in:

XXXXXXXXXX.

He will not join any social or recreational club in the U.S.

22. Mr. X will have a non-immigrant L-1A Temporary work visa while he is in the U.S. He will not apply for U.S. landed immigrant status (a "green-card").

23. Mr. X will be present in the U.S. for more than 183 days in each of the years of the Assignment and will consequently be considered a U.S. resident for U.S. income tax purposes before taking into account applicable Treaty considerations, if any.

24. Mr. X will be subject to federal, state and local income tax in the U.S.

25. Mr. X will retain his driver's license in Canada and will likely apply for one in the U.S. He will keep his automobiles in Canada.

26. Mr. X will open a bank account and apply for a credit card in the U.S., but he will not open any investment accounts in the U.S. or own any U.S. investments other than what he already owns now.

27. Mr. X will likely acquire additional private health insurance in Canada and in the U.S. for the duration of the Assignment.

Purpose of the Proposed Transactions

These proposed transactions are being undertaken so that Mr. X can fulfil his employment obligations to Xco. Mr. X has accepted an assignment to be responsible for the profitability, return on assets and growth of the XXXXXXXXXX businesses owned and operated by Xco and two subsidiary companies in Canada, and by affiliates of Xco in the U.S. He is required to concentrate his time on the XXXXXXXXXX business based in XXXXXXXXXX until such time as the profitability of that business unit is restored and sustainable. As a result, he is required to temporarily establish a secondary residence in locations other than XXXXXXXXXX in order to carry out his duties effectively.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our rulings are as follows:

A. Mr. X will remain a resident of Canada for purposes of the Act during the Assignment. As a result, he will not be deemed to have disposed of property under paragraph 128.1(4)(b).

B. Mr. X will be considered to be a resident of Canada for purposes of the Treaty during the Assignment. Consequently, subsection 250(5) will not apply to deem him to be a non-resident of Canada for purposes of the Act.

The above rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and are binding on the Canada Revenue Agency ("CRA") provided that the proposed transactions are implemented before XXXXXXXXXX.

These rulings are based on the Act in its present form and do not take into account amendments to the Act which, if enacted into law, could have an effect on the rulings provided herein.

Other Comments

Nothing in this ruling should be construed as implying that the CRA has agreed to or reviewed any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.

Yours truly,

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

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