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 employees who work in a prescribed northern zone in employer provided accommodation, for a schedule of four days or fourteen days and then return to their principle residence outside the prescribed northern zone, would be considered to have resided in a prescribed northern zone for a period of more than six consecutive months for purposes of the northern residents deduction.
Position: No
Reasons: Employees do not meet requirements of subsection 110.7(1) that requires that they reside for a period that is "not less than 6 consecutive months".
2005-014173
XXXXXXXXXX Darlene Green
(613) 957-2082
January 16, 2006
Dear XXXXXXXXXX:
Re: Northern Residents Deduction - Residency Requirement
This is in response to correspondence of July 11, 2005 from XXXXXXXXXX, in which he requested an interpretation on whether certain employees would be considered to have resided in a prescribed northern zone for a period of more than six consecutive months for purposes of the northern residents deduction.
Specifically, the request outlined a scenario in which employees of a Canadian mining corporation operating in a prescribed northern zone live at the mine site in employer-provided accommodation during their scheduled work period. The employees' work schedules are either four or fourteen consecutive days, and then they return to their principle residence for the related amount of scheduled time off of three or fourteen days, respectively. The employees' principle place of residence may not be located in a prescribed northern zone.
Subsection 110.7 (1) of the Income Tax Act (the "Act") provides an individual with a deduction, for residing in a prescribed northern zone, when the individual resides there "throughout a period ... of not less than 6 consecutive months beginning or ending in a taxation year". Whether or not an individual would be entitled to a deduction pursuant to subsection 110.7(1) of the Act for the period when by virtue of employment he / she resides in employer provided accommodation in a prescribed northern zone, can only be determined after a review of all of the relevant facts of the particular situation. In general, where an employee works in a prescribed northern zone and returns to his/her principal place of residence outside of the zone in the circumstances described in your letter, it is our view that such an individual does not reside in a prescribed northern zone "throughout a period...of not less than 6 consecutive months..." Accordingly, such an individual would not be entitled to the deduction in computing income for a taxation year provided under subsection 110.7(1) of the Act.
Where individuals who reside in a prescribed northern zone on a permanent basis, that is, "in the settled routine" of their lives, that location is where they are considered to "regularly or customarily" reside. In such a case, continuity is not considered to be broken by short term absences such as vacations and temporary work assignments. However, there are individuals who reside in the prescribed northern zone on a temporary basis (although for at least six months) and who maintain another residence in a non-prescribed zone where they or their families "regularly or customarily" reside. For these individuals, it is our view that temporary absences of returning regularly to their permanent residence is considered to be a break in the continuity of residency in the prescribed zone.
We trust that our comments will be of assistance to you.
Yours truly,
Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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