1 March 1973 Income Tax Severed Letter

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.

March 1, 1973

Your Reference XXXX

This is in reply to your letter of January 17, 1973 requesting advice on the matters raised by the XXXX

This draft contains an erroneous conclusion that a student with foreign citizenship is not subject to tax by Canada unless he is physically present in Canada for more than half of the particular calendar year.

Every person resident or ordinarily resident in Canada at any time in a taxation year is liable for Canadian income tax on his income from all sources during such period of residence. Residence should be determined on the basis of fact, bearing in mind that a resident in a foreign country is deemed to be resident also in Canada for the whole of a taxation year, if he sojourned in Canada an aggregate of more than 182 days in that taxation year. The non-resident person who is not in Canada more than 182 days in the year is subject to tax by Canada only on his income from Canadian sources. In the case of an individual, a taxation year is the calendar year.

The student who is no longer ordinarily resident of a foreign country by reason of his studies in Canada will be considered to have taken up residence in Canada on the date of his arrival in Canada and to have given up such status on the date of his departure from Canada. Students who are ordinarily resident in a foreign country and are temporarily in Canada on vacation or in the course of their studies are regarded as non-residents not subject to Canadian income tax on foreign source income unless they sojourn in Canada an aggregate of more than 162 days in the year. In view of this, we expect that non- resident status could be maintained only by the student who is in Canada on a short-term basis.

All amounts received by a student while resident or deemed resident in Canada as or on account of a scholarship, fellowship or bursary must be included in his income to the extent that these amounts received in the year exceed $500.00. Such award income may be further reduced by moving expenses incurred by the student in moving his place of residence in order to attend full-time courses at a university or other post-secondary institution. If the student has income from research grants or employment, he may claim a deduction equal to the lesser of 3% of such income or $150.00. Income from all sources may be further reduced by the amount of the tuition fees paid to the educational institution in respect of a period not exceeding 12 months commencing in the year and not deducted in a previous year. This resulting net income from all sources is reduced by personal exemptions and a standard deduction of $100.00 in the computation of the taxable income of an individual for a taxation year. For 1972, personal exemptions were $1,500.00 for single taxpayer and $2,850.00 for a married person who supported a spouse whose income for the year was not in excess of $250.00. Additional exemptions are permitted for wholly-dependent children. Proposals have been made to increase these exemptions to $1,600.00 for a single person and to $3,000.00 for a married person for the 1973 taxation year. Where the taxpayer is considered to be resident in Canada for only part of a taxation year, the personal exemptions and standard deduction are to be apportioned on the basis of the number of days of the year that the taxpayer was so considered to have been resident in Canada. A foreign tax deduction in respect to foreign income taxes paid in the year on amounts included in income for Canadian tax purposes is permitted in the computation for the year.

We enclose a copy of our Interpretation Bulletin IT-75 on the subject of Scholarships, Bursaries, Prizes and Research Grants. We are also enclosing a 1972 Individual Income Tax Return. The Guide and Tax Tables accompanying that return contain the details of tax rates and basic personal exemptions which you requested. You will note that provincial income tax for each province, except Quebec, is expressed as a percentage of basic federal tax and is collected by the federal government. Although a resident of Quebec is permitted a special reduction from basic federal tax, he is required to file a separate provincial income tax return with that province.

Yours sincerely,

Assistant Deputy Minister (Legislation)

JJS/AIM

Research Files: 56(1)(n), 56(1)(o), 114, 115(2)

ENCL.