7 November 2007 External T.I. 2005-0139501E5 - Residency of International Students

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: Residency status of an international student

Position: General comments. IT-221R3. 250(1) and 250(5) provides rules to determine, respectively, whether an international student is deemed to be resident in Canada and whether the international student is deemed to be non-resident of Canada.

Reasons: For the factual residency issue, it is a question of fact. For the deeming rules dispositions of the Act.

XXXXXXXXXX 							2005-013950
								Sylvie Labarre, CA
November 7, 2007 

Dear Sir:

Re: International Students

This is in reply to your letter of June 21, 2005 in which you requested clarification on the Agency's guidelines for the determination of residency status of visiting students from other countries (hereinafter "international students").

Some of your clients have attended information sessions given by representatives of the International Tax Services Office to international students. They understood that they will be considered residents of Canada for tax purposes if they establish residential ties in Canada and stay in Canada for at least 183 days.

You would like to know if this represents the position of the Canada Revenue Agency (CRA) with respect to the residency status of international students.

If the position mentioned by your clients represents CRA's position, you would like to know what particular secondary tie or combination thereof would lead to a determination that an international student has established residential ties in Canada and you are wondering whether renting an apartment for six months is sufficient to be considered as a resident of Canada. Indeed, in your experience, international students usually have no significant residential ties with Canada and little in the way of secondary ties. For example, they do not have immigration status and do not have provincial medical coverage. Unless they are working in Canada, they are not even required to obtain a social insurance number.

If the position mentioned by your clients represents CRA's position, you want to know if the 183-day requirement is a new criterion to establish whether an international student is a factual resident of Canada. You mentioned that with a few exceptions, international students still have residential ties with their country of origin. For example, they remain citizens or nationals of these countries. In the absence of any significant residential ties or substantial secondary ties with Canada, your present policy is to refer to the tie-breaker rules in the tax treaty with the client's country of origin to determine his or her residency status under that treaty. In the event that the client is a resident of his or her country of origin for the purpose of the treaty, you then treat the client as a deemed non-resident of Canada under subsection 250(5) of the Income Tax Act (the "Act") for filing purposes. You would like to know if this is the correct procedure.

Our comments

Although you have asked for a technical interpretation, the situation may be a factual one involving specific taxpayers. Confirmation of residency status in factual situations is handled by the International Tax Services Office on completion of form NR74, Determination of Residency Status (Entering Canada). We are, however, prepared to provide some general comments.

Your clients indicated that they will be considered residents of Canada if they established residential ties in Canada and stay in Canada for at least 183 days. This is incorrect. The residential tie test, which is a common law test, and the length of stay test, which is a statutory test, are separate and independent tests. An individual will be a resident of Canada for tax purposes if he meets either test.

Residency status is a question of fact and the facts of each case must be considered in order to reach a conclusion as to an individual's residency status for income tax purposes. You will find information about residency status in Interpretation Bulletin IT-221R3 or in pamphlet T4055 (Newcomers to Canada - 2007) on our web site at www.cra.gc.ca/forms.

Generally, an international student becomes a resident of Canada and subject to tax on his worldwide income from the moment he establishes significant residential ties in Canada. Residential ties include a home in Canada, a spouse or common-law partner and dependants who move to Canada to live with him, personal property such as a car or furniture, and social ties in Canada. Other ties that may be relevant include a Canadian driver's licence, a Canadian bank account or credit cards or health insurance with a Canadian province or territory.

A list of secondary residential ties is provided in paragraph 8 of IT-221R3. As stated in that paragraph, the secondary residential ties must generally be looked at collectively in order to evaluate the significance of any one such tie and it would be unusual for a single secondary residential tie with Canada to be sufficient in and by itself to lead to a determination that an international student is factually resident in Canada. We have not identified any particular combination of secondary residential ties that would be conclusive on the residency question. While the rental of an apartment in Canada by a person is an important factor, it is generally not, in and of itself, determinative in deciding whether that person is resident in Canada. Other factors must be also taken into account to determine residency status of a person. The fact that an international student returns to his country of origin on a periodic basis or for a significant amount of time in the calendar year or the fact that the international student moves to another country when not attending university in Canada may be relevant factors in that determination.

We did not add a new criterion of 183 days in Canada in a calendar year to determine whether a person is a factual resident of Canada. However, where an international student is not a factual resident of Canada, he is deemed to have been a resident of Canada throughout a taxation year if he stays in Canada for 183 days or more in a calendar year in accordance with paragraph 250(1)(a) of the Act.

On the other hand, an international student who is otherwise resident in Canada for purposes of the Act (whether factual or deemed), and who, at a given time, is resident in another country for purposes of a tax treaty between Canada and that country, is deemed not to be resident in Canada at that time, pursuant to subsection 250(5) of the Act. Indeed, an individual who is a resident of Canada for purposes of the Act is a resident of Canada for purposes of paragraph 1 of the Residence Article of any modern tax treaty between Canada and another country and such an individual may also be a resident of the other country for purposes of the same paragraph in the same treaty. In this situation, the Residence Article in the tax treaty will provide "tie breaker rules" to determine in which country the individual will be resident for purposes of the other provisions of the treaty. If, at any time, such "tie breaker rules" apply and it is determined that an individual is a resident of another country for purposes of a tax treaty between Canada and that country, then subsection 250(5) of the Act will deem that individual to be a non-resident of Canada for purposes of the Act.

We trust the above comments will be of some assistance. We apologize for the delay in responding.

Yours truly,

Alain Godin, Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch