14 September 1993 External T.I. 9320055 F - General Inquiry Immigration to Cda.

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.

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Dear Sir:

RE:  IMMIGRATION TO CANADA

This is in reply to your letter of July 3, 1993 concerning the tax implications when you immigrate to Canada. From your letter we understand that:

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Our Comments:

The following comments are general in nature, as we do not have adequate information to respond specifically to your inquiry. For purposes of our response we have assumed that you will become a resident of Canada when you immigrate to Canada.

Income taxes in Canada are imposed on the basis of residence, as well as source of income. The term "resident" is not defined in the Income Tax Act however, the Courts have held that an individual is resident in Canada if Canada is the place where he, in the settled routine of his life, regularly, normally, or customarily lives. In making this determination, all of the relevant facts in each case must be considered. If you wish to have your residential status determined you will be required to complete the attached form NR74E and return it to the address on that Form. Also enclosed is the copy of Interpretation Bulletin IT-221R2 which outlines our view of the determination of an individuals residential status.

Taxpayers who are resident in Canada are subject to income tax on their world income, however in order to avoid double taxation, the taxpayer is permitted to deduct all or a portion of the tax paid to a foreign jurisdiction (foreign tax credit) in calculating his Canadian taxes.

The attached Interpretation Bulletin IT-270R2 provides further details on the calculation of a foreign tax credit. There is no requirement that you transfer your British investments to Canada, however, a resident of Canada is subject to tax on investment income whether earned inside or outside Canada.

With respect to your first inquiry, rental income from the U.K. property will be taxed in Canada as residents of Canada are taxed on their world income. Rental income may also be subject to tax in the United Kingdom, we therefore suggest you consult with the tax authorities in that country to determine whether you will be taxed on such income as a resident of Canada. In the event the rental income is taxable in the United Kingdom, in accordance with the enclosed income tax treaty between Canada and the United Kingdom, you will be permitted to claim a foreign tax credit in Canada in order to avoid double taxation. See page 43 and the "Detailed Tax Calculation" (Schedule 1) located in the attached Federal and Provincial General Tax Guide and Return .

With respect to your second inquiry regarding selling capital properties after you immigrate to Canada (both the equities and the rental property), page 43 of the enclosed Capital Gains Tax Guide, and paragraphs 24 - 26 of the attached Interpretation Bulletin IT-451R provides general comments on this topic. As a general comment, when you immigrate to Canada you are deemed to acquire your capital property at its fair market value ("FMV") at the time you arrive in Canada. If you dispose of this property after you have established Canadian residency you will be taxable on the capital gain. In general the capital gain would be the difference between the selling price of the properties and the FMV at the time you immigrated to Canada. In the event you are taxable on the capital gain in both Canada and the United Kingdom it will be necessary to refer to the Treaty between Canada and the United Kingdom to determine which country has the right to tax and to eliminate any double taxation that may arise.

With respect to your third inquiry, if you carry on business in Canada you will be taxable in Canada on your world income. For more information on this topic we suggest you refer to the enclosed "Business and Professional Income Tax Guide".

We are enclosing the following additional publications which will assist you in understanding how the Canadian Tax system will affect you.

1.     Interpretation Bulletin 506 (IT-506) "Foreign Income Taxes as a Deduction From Income"

2.     1992 Tax Guide for New Canadians

3.     Business and Professional Income Tax Guide

4.     Rental Income Tax Guide

5.     Canada - United Kingdom Income Tax Convention (1978)

6.     Interpretation Bulletin IT-193 "Taxable Income of Individuals Resident in Canada during Part of a Year".

We trust the enclosed information will be of assistance to you in planning your financial affairs prior to immigrating to Canada.

Yours truly,

for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch