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: Where a taxpayer is a part year resident in Alberta during the calendar year and earns employment income in Quebec while a non-resident of Canada in the particular year, is the employment income attributable to Alberta?
Reasons: Under subsection 6(4) the Alberta Personal Income Tax Act (the "APITA"), an individual who is a resident of Alberta for part of the year attributes income for the year, calculated under section 114 of the ITA, to Alberta.
February 15, 2012
Dear XXXXXXXXXX ,
Re: Part-year Resident - Income Earned in a Province
This is in response to your request for our views about whether employment income earned in Quebec in a year by a United States citizen (the "Individual") is subject to tax in Alberta, the province where the Individual was a resident for part of the particular year. The individual was not resident in any other province for the year. Whether an individual is resident in Canada is a question of fact to be determined on the basis of all relevant circumstances. Additional information to be considered in determining whether an individual leaving Canada remains a resident in Canada for tax purposes can be found in IT-221R3 Determination of an Individual's Residence Status.
Subsection 2(2) of the Income Tax Act (the "ITA") provides that the taxable income of a taxpayer for a taxation year is the taxpayer's income for the year plus additions and minus deductions permitted by Division C. For an individual, a taxation year is defined in subsection 249(1) of the ITA to be a calendar year. In general terms an individual who is resident in Canada is subject to Canadian income tax on their world taxable income from all sources. However, for an individual who is resident in Canada for only part of a year, section 114 of the ITA modifies taxable income otherwise calculated under subsection 2(2) of the ITA to include income earned while a resident plus income and losses included under paragraphs 115(1)(a) through (c) of the ITA for the part of the year during which the individual is a non-resident. Therefore, Quebec employment income earned while a non-resident of Canada by an individual resident in Alberta for only part of the year is subject to income tax in Canada.
An individual is also generally subject to provincial income tax in the province or territory in which the individual is resident on December 31. Based on the information provided, the Individual maintained a residence in Alberta until XXXXXXXXXX at which time they ceased residential ties in Canada. The Alberta Personal Income Tax Act (the "APITA"), imposes tax on an individual's income for the year as determined under section 114 of the ITA where the individual is resident in Alberta during only part of the year, not resident in any other province or territory after ceasing to be resident in Alberta, and resident in a jurisdiction outside of Canada on the last day of a calendar year.
Accordingly, a part-year Alberta resident is subject to tax under the APITA in a particular taxation year on world income up to the time of departure and on income from the duties of employment performed in Canada during the period of non-residence.
You also questioned whether the prescribed rules in subsection 2600(1) and paragraph 2601(5)(a) of the Regulations to the ITA apply to the individual's situation. These prescribed rules apply for purposes of subsection 120(4) of the ITA. Subsection 120(4) of the ITA and subsection 2600 of the Regulations provide definitions for the purpose of the federal "non-resident surtax". The non-resident surtax is payable on income that is not earned in a province. Based on subsection 2601(1) of the Regulation, all of the individual's employment income is earned in Alberta. Therefore, the Individual is not subject to the federal surtax.
We trust our comments will be of assistance to you.
Lita Krantz, CA
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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