7 June 1990 Income Tax Severed Letter AC74573 - Extended Meaning of Resident for Servant of Canada

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.

Non-Resident Taxation Division FROM Specialty Rulings
Cheryl Charette Directorate
O. Laurikainen
957-2125
FILE
DOSSIER 7-4573

SUBJECT: Determination of Residency Status

This is in response to your memorandum to us dated December 6,
1989 wherein you have enquired whether a Canadian government
employee who is on secondment to the Belgian operations of not by
its statutes give the 24(1) a Canadian crown
corporation which does not by its statutes give the status/of
"servant" to its employees, would nevertheless be deemed resident
in Canada pursuant to paragraph 250(l)(c) of the Income Tax Act
(the "Act").

The facts you have presented are as follows: 24(1)

While the above facts are adequate to determine whether or not
19(1) is deemed to be resident in Canada under paragraph
25O(l)(c) of the Act, they don't in our view represent
conclusive evidence that 19(1) is no longer factually
resident in Canada.

Subparagraph 250(l)(c)(i) of the Act refers to a servant of Canada. "Servant" is defined in subsection 248(l), within the definition of "employment", as a person holding the position of an individual in the service of some other person. Since an individual can qualify as a "servant" of Canada under this definition without actually rendering services to Canada, it would appear to follow that a public servant on secondment to another employer remains a servant of Canada. Accordingly, it is our view that such an individual would be deemed resident in Canada pursuant to paragraph 250(l)(c) of the Act. This would be true even if the secondment was to a non-government organization.

In order for it to fall within the jurisdiction of Article XIX of
the Canada-Belgium Income Tax Convention (1975) (the "treaty")
however, remuneration earned by an individual has to be in
respect of services rendered by him to the government of Canada.
In our view 24(1)

Remuneration in respect or services rendered in connection with any trade or business carried on by the government of Canada in Belgium would be excluded from the application of paragraph I of Article XIX of the treaty by paragraph 2 thereof.

In order to be able to assess how other Articles of the treaty
might apply to 19(1) it is necessary to first
determine where he is resident for the purpose of the treaty
pursuant to the criteria set out in Article IV. In 19(1)
"Application for Reduction in Income Tax Deductions" a copy of
which was attached to your enquiry.

24(1)

In our view it is not entirely clear that based on the facts
presented, 19(1) would be resident in Belgium for
the purposes of the treaty.

Article IV of the treaty sets out tie-breaker rules that are to
be employed in the event that an individual is' resident in both
Canada and Belgium for the purposes of the domestic tax laws of
the two countries. The first tie-breaker would decide in favour
of the country in which a person has a permanent home available
to him. The material you have submitted suggests that 19(1)
would have a permanent home available to him in Belgium but
does,not address the question of whether he would retain one in
Canada. Given the relatively short duration of his assignment
and the provisions for early termination, it is likely that he
would retain a permanent home available to him in Canada. Should
19(1) prove to have a permanent home available to him in
both countries second tie-breaker rule set out in Article IV of
the treaty would find in favour of the country with which his
personal and economic relations are closest (centre of vital
interests). Of relevance to the determination of a person's
centre of vital interests are factors such as the location of his
family and social relations and political, cultural, religious
and financial relations. While the location of a person's centre
of vital interests is a question of fact, 24(1) would
direct us towarad the conclusion that his centre or vital
interests may very well remain in Canada. In the event 19(1)
is resident in Canada for the purposes of the treaty, Canada's
right tax his Belgian source employment income is preserved under
Article of the treaty. As that Article would also allow Belgium
to tax such income, a foreign tax credit would be available under
subsection 126(l) with respect to Belgian income tax paid on such
income.

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch

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