18 November 2024 Internal T.I. 2024-1015501I7 - Part-year residence

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 an individual who is deemed to be resident in Canada pursuant to paragraph 250(1)(a) in a taxation year and who subsequently becomes factually resident in Canada in the same taxation year has a period of part-year residence.

Position: No.

Reasons: An individual who is deemed to be resident in Canada pursuant to paragraph 250(1)(a) is deemed to be so resident throughout the taxation year.

      Jeff Haynes									HEADQUARTERS
      Senior Programs Officer							Income Tax Rulings
      Individual Policy and Technical Support Section	  		Directorate
      XXXXXXXXXX									K. Graham

This is in reply to your request asking whether an individual who is deemed to be resident in Canada and who subsequently becomes factually resident in Canada can have a period of part-year residence. You described a scenario where an individual sojourns in Canada for more than 183 days in a taxation year and consequently is deemed to be resident in Canada throughout the taxation year pursuant to paragraph 250(1)(a) of the Income Tax Act, R.S.C. 1985, c.1 (5th supp.), as amended (“Act”). During that same taxation year, the individual establishes significant residential ties in Canada and becomes factually resident in Canada.

As the tax consequences, particularly the application of the federal surtax and/or provincial income tax, for an individual who is deemed to be resident in Canada can be different from those for an individual who is factually resident in Canada, you have asked whether the individual described in your scenario will have a period of part-year residence in Canada.

Please note that for the purpose of simplicity, we have assumed that the individual described in the scenario above does not have any income from a source that is a business. All legislative references in this document are to the Act or the Income Tax Regulations, unless otherwise specified.

Our Comments

An individual’s liability for income tax in Canada is based on his or her status as a resident or a non-resident of Canada. In general, an individual who is resident in Canada during a taxation year is subject to Canadian income tax on his or her worldwide income from all sources and a non-resident individual is only subject to Canadian income tax on income from sources inside Canada.

An individual may be resident in Canada for only part of a year, in which case the individual will generally only be subject to Canadian tax on his or her worldwide income during the part of the year in which he or she is resident; during the other part of the year, the individual will be taxed as a non-resident.

Deemed resident

Pursuant to paragraph 250(1)(a), a person who sojourns in Canada for a period of, or periods the total of which is, 183 days or more in a taxation year is deemed to be resident in Canada throughout that year. A person that is deemed to be resident in Canada is not factually resident in Canada and will not generally be resident in a particular province for provincial tax purposes. However, a person who sojourns for that period of time in XXXXXXXXXX may be considered a deemed resident of XXXXXXXXXX. (footnote 1)

It is important to note that subsection 250(5) deems a person who is otherwise resident in Canada for purposes of the Act (including a person who is deemed to be resident in Canada pursuant to paragraph 250(1)(a)) to be not resident in Canada if the person is deemed to be a resident of another country pursuant to a tax treaty that Canada has with the other country.

Part-year resident

Where an individual is resident in Canada throughout part of a taxation year and not resident in Canada throughout another part of the year, section 114 determines the taxable income of such an individual. However, section 114 does not apply to an individual that is deemed by paragraph 250(1)(a) to be resident in Canada since that individual will be deemed to be resident in Canada throughout the taxation year.

As a result, an individual who is deemed to be resident in Canada pursuant to paragraph 250(1)(a), and who is not described by subsection 250(5), will not have a period of part-year residence in Canada.

We trust our comments are of assistance.

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.

Yours truly,

Angelina Argento
Manager
for Division Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 XXXXXXXXXX