7 June 1990 Ruling 74573 F - Determination of Residency 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.

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(1)(c) of the Income Tax Act (the "Act").

The facts you have presented are as follows:

24(1)

24(1)

While the above facts are adequate to determine whether or not 19(1)  is deemed to be resident in Canada under paragraph 250(1)(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(1)(c)(i) of the Act refers to a servant of Canada. "Servant" is defined in subsection 248(1), 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(1)(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 toward 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 DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch