15 September 1987 Income Tax Severed Letter 7-2015 - [Residential Status]

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.

DATE: September 15, 1987

To- Ottawa Taxation Centre

FROM - Specialty Rulings Directorate R.A. Primeau 957-2122

ATTENTION Monique J. Séguin Non-Resident Section

RE: XXX Residential Status

This is in reply to your memorandum of August 7, 1987 wherein you request our opinion on the residential status of the above-captioned taxpayer.

XXX

Paragraph 5 of IT-221R2 indicates that where an individual is absent from Canada for 2 years or longer, he will be presumed to have become a non-resident of Canada provided that he satisfies the other requirements for non-resident status outlined in paragraphs 6 to 12 of the bulletin, i.e. provided that he severs his residential ties with Canada. Paragraph 4 of the bulletin states that if there is evidence that an individual's return to Canada was foreseen at the time of his departure, as would be the case for example where he has a contract for employment in Canada upon his return to Canada, he will be presumed not to have severed all of his residential ties on leaving Canada.

It is a question of fact as to whether an individual does or does not sever his residential ties with Canada. The aforementioned paragraphs 6 to 12 of IT-221R2 set out a number of factors and circumstances that should be considered in determining the answer to this question. The materials you have sent us do not contain sufficient information on these factors and circumstances for us to arrive at a definitive conclusion on the matter. In any event, we understand that a taxpayer's District Office usually makes this determination based on the results of an extensive battery of questions that are posed to him.

Notwithstanding that we cannot, for the reasons stated above, come to a definitive conclusion on whether or not XXX will be severing his residential ties with Canada, we should point out that his draft contract with the XXX contains a number of indications that he will be returning to Canada upon the expiration of the contract, as follows:

Article I C.- XXX

Article II.- XXX

Article II A.2.- XXX

Article II A.3.- XXX

Article II B.1. - XXX

Article V C. 1, 2 & 3 XXX

Article II G.- XXX

Based on the above provisions in the draft contract, it is our opinion that it can at least be presumed that XXX will be returning to Canada and will not sever his residential ties with Canada throughout the duration of his employment with the XXX.

Even if XXX does sever his residential ties with Canada, he will be deemed by paragraph 250(1)(d) of the Act to be a resident of Canada throughout any year in which he performs services for the XXX if i) he commenced performance of such services for the XXX within 3 months of severing his residential ties with Canada, and ii) such performance of services for the XXX is under a prescribed international development assistance program of the Government of Canada.

Section 3400 of the Income Tax Regulations prescribes each international development assistance program of CIDA that is financed with funds (other than loan assistance funds) provided under External Affairs Vote 30a, Appropriation Act No. 3, 1977- 78, or another vote providing for such financing, to be an international development assistance program of the Government of Canada for purposes of paragraph 250(1)(d) of the Act.

We have spoken with Mr. Bill Baine of CIDA, who has informed us that XXX contract with the XXX is under a CIDA grant program. This is, the funds required by the XXX to pay XXX remuneration will come out of a grant or grants (not loans) from CIDA to the XXX. This statement seems to be corroborated by various references to CIDA in the draft contract, particularly that contained in Article V E.6. thereof. It is therefore our opinion that XXX will be performing his services for the XXX under a prescribed international development assistance program of the Government of Canada. Accordingly, if XXX commences his services for the XXX within 3 months of leaving Canada, there will be essentially two tax results.

1) As stated above, even if he does sever his residential ties with Canada, he will be deemed by virtue of paragraph 250(1)(d) to be a resident of Canada throughout any year in which he performs such services for the XXX.

2) Regardless of whether he will be a deemed resident under paragraph 250(1)(d) or simply a resident by virtue of his not severing his residential ties with Canada, he will be entitled to an exemption from tax under subparagraph 6(1)(b)(iii) of the Act on any representation or other special allowances received in respect of the period of his absence from Canada to work under the contract with the XXX.

Finally, we would like to consider whether there is any impact by the Canada- Ivory Coast Income Tax Convention (1983) (the "treaty") on the above. Paragraph 1 of Article 4 of the treaty provides that for the purposes of the treaty, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax by reason of his domicile, residence, place of management or any other criterion of a similar nature. (Since this could result in dual residence, paragraph 2 of that Article then provides tie breaker rules to determine which of the two Contracting States an individual is a resident of for purposes of the treaty).

XXX has indicated that he will be liable to tax in the Ivory Coast when under contract with the XXX. If such is the case, then he will not be a resident of the Ivory Coast for purposes of the treaty by virtue of paragraph 1 of the Article 4 of the treaty. In other words, XXX will simply be considered a resident of Canada and the treaty will therefore not alter the Canadian tax consequences which we have outlined above.

We trust that our comments will assist you in dealing with this matter.

Chief Foreign and Small Business Section Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental- Affairs Branch