Section 2

Subsection 2(1) - Tax payable by persons resident in Canada


A person who is resident in Canada is subject to tax under Part I of the Act on its world-wide income (or, to be more precise, on its taxable income determined under Division C of Part I after its income is determined under Division B of Part I).


Where a corporation is not deemed to be resident in Canada (for example, pursuant to s. 250(4) as a result of its incorporation in Canada after April 26, 1965), it generally will be considered to be resident in Canada (or another jurisdiction) if its central management and control is exercised there. Normally, the central management and control of a corporation will be exercised by its directors. Accordingly, where the directors meet to attend to the important decisions of the corporation's undertaking, the corporation will be considered to be resident (under this jurisprudential test) in the jurisdiction where they hold most or all of their meetings (1143132, Capitol Life, Wood v. Holden). However, the Supreme Court has confirmed a proposition in a British case that where the central management and control of a corporation is in fact exercised by its shareholder rather than the board of directors, the residence of the corporation will be in the jurisdiction where the shareholder resides and exercises such management and control (Fundy Settlement).


The corporate residency principle was extended to trusts in the Fundy Settlement case, so that a trust will be resident where its central management and control is exercised - in this case, somewhat unusually, by individuals who were not its trustees. The earlier decision in Thibodeau was interpreted by some to have established a black-letter law proposition that a trust generally is resident where the majority of its trustees are resident, but this proposition is no longer good law (although, more often than not, the residence of a trust and the residence of the majority of its trustees will match.)


S. 250(3) indicates that an individual is resident in Canada where the individual is ordinarily resident there. This provision is in part the ultimate basis for numerous decisions that have found individuals who have maintained extensive social or business ties with Canada, or who have maintained a home or apartment there, to be resident in Canada notwithstanding that they have for a number of years spent most of each such year abroad. The matrix for these decisions is the Thomson case, which found that an individual who spent less than 1/2 of each year in Canada nonetheless was ordinarily resident here because of his personal ties to Canada, viz. "the family ties of his wife, if not of himself, the erection of a substantial house, the retention of the ser­vants, together with all the surrounding circumstances." Individuals who have had extended work assignments abroad have been found to have continued to maintain their residence in Canada as a result of maintaining a home in Canada or of extensive social and family ties with Canada (for example, Bensouilah, Gaudreau, Minin - see also Barton, Sherwood) - and in Perlman, even a 16-year stint in Israel in full-time rabbinical studies was not sufficient to lose Canadian residency on the basis of various continued ties with Canada. Conversely, individuals who have sought to establish a residence in a sunnier clime have been found to be resident in Canada on the basis that their work routine was centered in Canada (Hauser, Filipek cf. Laurin).

The fact that members of the extended family remain in Canada with whom there are visits does not by itself represent a sufficient tie to Canada to establish ordinary residence there (Nedelcu).

The UK Supreme Court has indicated that whenever an individual has left the UK to pursue full-time employment abroad, it is likely that he will be considered to have made a "distinct break in the pattern of his life in the United Kingdom," and thereby ceased to be ordinarily resident in the UK, notwithstanding that he or she may not have severed his or her family and social ties with the UK (Davies). This position seems to be contrary to Canadian lower court decisions (referenced above) respecting Canadian individuals who took a full-time job abroad (see also Glow, Mullen, Johnson, Gaudreau, Snow). Given that the test of individual residency has not been considered by the Supreme Court of Canada since the Thomson case (which is based, in part, on the same English jurisprudence, e.g., Levene, as that underlying this UK decision), it is possible that the current Canadian judicial test, indicating a requirement that an individual sever most of his or her significant social and family ties with Canada in order to cease to be a resident, will not be the last word on this issue.

It has been stated that "one would generally expect spouses to reside in the same country for tax purposes unless they lived apart for some reason" - and also that questionnaires which CRA frequently uses in assessing an individual's residency status "often do not present a complete picture" (Fatima).


Landbouwbedrijf Backx B.V. v. Canada, 2019 FCA 310

notwithstanding sole Netherlands director, decision-making was made by the shareholders in Canada

When a Netherlands couple immigrated to Canada in 1998 to acquire a dairy farm here, they created a structure under which the farm was held in a partnership which was held by them directly as to 51% and as to 49% through a Netherlands holding company (“B.V.”) of which the wife’s sister (a Netherlands resident) was the sole director. On the subsequent disposition in 2009 by B.V. of the partnership interest, they took the position that B.V.’s gain was exempt from tax under the Canada-Netherlands Treaty, as being from the disposition of a substantial interest in a partnership holding a property (the farm) in which its business was carried on.

Before coming to the Treaty issue, and in affirming the finding below that the central management and control of B.V. was in Canada, Rivoalen JA stated (at para. 10) that the “record supports the Tax Court’s factual findings that the shareholders in Canada were making the decisions, not the director in the Netherlands.”

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 4 potential relief under Dutch Treaty needed to be addressed even for mooted dual resident who had not been agreed by competent authorities to be a Dutch resident 313
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(c) s. 128.1(1)(c) step-up turned upon becoming resident in Canada 368

Fundy Settlement v. Canada, 2012 DTC 5063 [at 6881], 2012 SCC 14, [2012] 1 S.C.R. 520, aff'g sub nom St. Michael Trust Corp. v. The Queen, 2010 DTC 5189 [at 7361], 2010 FCA 309, aff'g sub nom Garron v. The Queen, 2009 DTC 1568, 2009 TCC 450

central management and control test for trust residence

The taxpayers were two Barbados trusts with Canadian beneficiaries. The trusts realized substantial capital gains on the sale of the shares of two Canadian holding companies which held the equity in a Canadian automotive company. They took the position that they were resident in Barbados on the basis that their sole trustee ("St. Michael") was a Barbados-resident corporation.

The Court noted (at para. 9) that under the central management and control test that is applied in determining the residence of a corporation:

where the facts are that the central management and control is exercised by a shareholder who is resident and making decisions in another country, the corporation will be found to be resident where the shareholder resides. (See Unit Construction Co. v. Bullock, [1960] A.C. 351 (H.L.).)

The Court then found that the trusts were resident in Canada, stating (at para. 15):

As with corporations, residence of a trust should be determined by the principle that a trust resides for the purposes of the Act where "its real business is carried on" [De Beers Consolidated Mines, Ltd. v. Howe, [1906] A.C. 455 (H.L.)], which is where the central management and control of the trust actually takes place. As indicated, the Tax Court judge found as a fact that the main beneficiaries exercised the central management and control of the trusts in Canada. She found that St. Michael had only a limited role - to provide administrative services - and little or no responsibility beyond that... .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) trust residence that of Canadian beneficiaries 168

Nedelcu v. Canada, 2010 DTC 5102 [at 6942], 2010 FCA 156

The taxpayer, who had left Canada a number of years previously, was not resident in Canada and, therefore, was not eligible for child tax benefits. Although she had extensive family who continued to be in Canada and she made infrequent visits to Canada to see them, neither she nor her husband had any business interest or real estate holdings in Canada, and had no membership in any social, recreational, religious or professional organizations based in Canada.

Glow v. The Queen, 92 DTC 6467, [1992] 2 CTC 245 (FCTD)

A management consultant, who spent a year and a half in Nigeria before returning to work with his employer in Canada, was found to be resident in Canada throughout that period given that he did not sever the business relationships that he had established in Canada, he did not establish any significant or permanent ties connecting him to Nigeria and his living companion had committed herself to return to Canada.

Oceanspan Carriers Ltd. v. The Queen, 87 DTC 5102, [1987] 1 CTC 210 (FCA)

"When a non-resident corporation whose fiscal period has been the calendar year becomes a resident part way through that fiscal period, and does not change its fiscal period, that becomes its taxation year." A calendar year corporation which became resident in Canada on June 15, 1976 accordingly was not required to prorate its non-capital losses for purposes of paragraph 111(1)(a), with the result that its 1976 loss incurred before June 15 could be carried forward to subsequent taxation years.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) 62
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxpayer "taxpayer" refers to a person who may become liable to tax 77

Capitol Life Insurance Co. v. The Queen, 84 DTC 6087, [1984] CTC 141 (FCTD), aff'd 86 DTC 6164, [1986] 1 CTC 388 (FCA)

"Both high level and immediate detailed control and management of the business [of the taxpayer insurance company] as well as all corporate meetings took place without exception exclusively in the United States." It accordingly could not be said of the taxpayer that it was resident here in Canada, as "residency in Canada for taxation purposes, in the case of a corporation, depends on whether 'it really keeps house and does business' here."

The Queen v. Sherwood, 78 DTC 6470, [1978] CTC 713 (FCTD)

The individual defendant, who spent much of the period from 1954-1958 in New York and, to a lesser extent, Europe, promoting stocks, was held to be ordinarily resident in Canada throughout that period. He made frequent visits to Canada to see his daughter and family for whom he maintained residences in Canada. He never sought an immigration visa for the United States, he had an investment counsellor and active bank accounts in Canada, and he was "in the difficult position ... of having to attempt to explain written statements made by him in leases, income tax returns, and even an affidavit used in proceedings in Canada ... all indicating a Canadian residence."

Thibodeau Family Trust v. The Queen, 78 DTC 6376, [1978] CTC 539 (FCTD)

trust was non-resident in Bermuda where majority of trustees resided, notwithstading active role of minority Canadian trustee

A trust whose deed of settlement permitted majority decisions, two of whose trustees were Bermuda residents, and whose res in the main was in Bermuda at all material times, was resident in Bermuda notwithstanding that the bulk of the trust's investments were made at the suggestion of the Canadian resident trustee.

The Queen v. Reeder, 75 DTC 5160, [1975] CTC 256 (FCTD)

A Canadian employee of Michelin who was sent with his wife to France for six months for training was resident in Canada throughout that period. "Throughout, his ties of whatever description have all been with Canada, save only those ties, undertaken during the term of his absence, which were necessary to permit him and his family to enjoy an acceptable and expected lifestyle while in France".

Thomson v. Minister of National Revenue, 2 DTC 812, [1946] S.C.R. 209

For a number of years the taxpayer spent between 81 and 159 days in Canada each year, with most of the balance spent in the United States. The taxpayer argued that he was not "ordinarily resident" for the purposes of what was then s. 9 (now reformulated in ss. 2(1) and 250(1)).

Rand J. set out the scope of "residence" at pp. 224-25:

For the purposes of income tax legislation, it must be assumed that every person has at all times a residence. It is not necessary to this that he should have a home or a particular place of abode or even a shelter. He may sleep in the open. It is important only to ascertain the spatial bounds within which he spends his life or to which his ordered or customary living is related.

The Court rejected the taxpayer's appeal. Kerwin J. at p. 214:

The appellant seeks to make himself a sojourner as he carefully remained in Canada for a period or periods amounting to less than 183 days during each year. This attempt fails. The family ties of his wife, if not of himself, the erection of a substantial house, the retention of the ser­vants, together with all the surrounding circumstances, make it clear to me that his occupancy of the house and his activities in Canada comprised more than a mere temporary stay therein.

Estey J. also stated for the majority at p. 233 that, throughout the Income Tax Act, "during" means "in the course of."

See Also

Marchessault v. ARQ, 2023 QCCQ 320

frequent visits by an Alberta worker (without a permanent Alberta home) to his Quebec parents and friends did not establish Quebec residence

The taxpayer started in 2006 to work exclusively at a succession of pipeline-construction jobs in Alberta (or, on occasion, in B.C.) in all but about three or four of the winter months - during which he would visit his parents and friends in Quebec (while generally staying in a hotel), or travel to warmer locations. Because his work sites kept shifting, he did not acquire a permanent home in Alberta. Previously single, he married in 2016 in Alberta, and moved with his spouse to Quebec in 2020, but following a rupture, he resumed his life in Alberta two years later.

In finding that the taxpayer was not resident in Quebec for the years assessed by the ARQ (2008 to 2013), Bergeron JCQ stated (at paras. 41, 46 and 66, TaxInterpretations translation):

The Court does not believe that Mr. Marchessault must deprive himself of the opportunities afforded by his mode of life to visit his parents in order to break his ties of residence to Quebec. Furthermore, his situation is distinguishable from that of a taxpayer who makes regular returns to Quebec to visit spouse and children … .

… Mr. Marchessault had a roof in Alberta, without having purchased a home there. However, the … [quoting Thomson] “spatial bounds within which he [spent] his life” were within Alberta throughout the Period … . .

Mr. Marchessault clearly demonstrated his intention from his adolescence to become established in western Canada.

His purchase of a house in Quebec was solely for the use of his aunt to provide a place for her and her children to stay.

R & C Commrs v Development Securities plc & Ors, [2020] EWCA Civ 1705

residence of Jersey subsidiary was in the UK given that its directors took instructions from the UK parent on a transaction not in its commercial interests

A U.K. tax avoidance scheme entailed Jersey subsidiaries (formed only for the purpose of implementing the scheme) acquiring assets from their UK parent (DS Plc) or its U.K. subsidiaries (pursuant to their exercise of call options) at prices corresponding to the assets’ historical cost plus an inflation-indexation adjustment and then, after the Jersey-resident directors had resigned, selling those assets back to the DS group at their much lower fair market value, thereby triggering a tax loss that could be used in the DS group. (Such transactions thus were not in the subsidiaries’ commercial interests.) The scheme depended on considering that these subsidiaries had their central management and control (“CMC”) and, thus, residence, in Jersey at the time of the acquisitions. Their directors consisted of the UK-resident secretary of DS Plc and three Jersey residents who also served as directors of numerous other client companies. The board held a three or four hour meeting in Jersey to review and approve the transactions, and three briefer meetings there to approve the granting and then exercise of the call options - and then the replacement of the Jersey directors by UK-management directors (when the time came in the PwC plan for the subsidiaries’ CMC to shift to the UK).

The Court reversed the Upper Tribunal and reinstated the finding of the First-Tier Tribunal that, at the acquisition times, the central management and control of the subsidiaries was exercised in the UK by the parent’s management and not in Jersey. David Richards LJ indicating that he would allow the appeal for the reasons given by Newey LJ. Nugee LJ concurred in the result, but stated (at para. 107) that he had “considerable reservations about the FTT’s reasoning”.

David Richards LJ stated (at paras. 111-112):

The clear conclusion to which the FTT came … was put by the FTT at [422], "the Jersey directors were acting under what they considered was an 'instruction' or 'order' from the parent".

The inevitable conclusion from that finding was … that the decision to enter into the relevant transactions was taken by the parent in the UK, not by the directors in Jersey. They were, of course, concerned to ensure that what they were being instructed to do was lawful. … Likewise, the directors were concerned to ensure that there were no unexpected liabilities for the Jersey companies, such as stamp duty, and to ensure that the documents were in proper order. None of that detracts from the FTT's finding as to who made the decision to enter into the transactions and where that decision was made.

Before finding, like David Richards LJ, that there had been no reversible error in the FTT’s reasons, Newey LJ stated (at para. 14):) The overarching principle is that a company resides for tax purposes where its real business is carried on, and that is where CMC actually abides;

I would draw the following points from the authorities:

i) The overarching principle is that a company resides for tax purposes where its real business is carried on, and that is where CMC actually abides;

ii) The principle applies in relation to subsidiaries, including special purpose vehicles;

iii) It is the actual place of management, not that in which it ought to be managed, which fixes the residence of a company;

iv) A company may be resident in a jurisdiction other than that of its incorporation not only where a constitutional organ exercises management and control elsewhere, but if the functions of the company's constitutional organs are usurped, in the sense that management and control is exercised independently of, or without regard to, its constitutional organs, or if an outsider dictates decisions (as opposed to merely proposing, advising and influencing decisions);

v) On the other hand, CMC of a subsidiary will not be taken to be in a jurisdiction other than that of its incorporation just because it is following a tax planning scheme propounded by its parent. Nor need it matter that a company's board takes decisions without full information or even in breach of the directors' duties;

Biya v. The Queen, 2020 TCC 113

a taxpayer who worked on a long-time basis in Ethiopia with a home there nonetheless resided in Canada

The Appellant was born in Ethiopia in 1958, immigrated with his wife to Canada in 1981, became a Canadian citizen in 1985, obtained a B. Comm from U. of T. in 1989, had three sons in Canada, and operated his own business from 1996 to 2004 when he sold it, though he continued to work for the business until 2006. He separated from his wife in 2006 and returned to Ethiopia to work in the mining industry from 2006 to 2015 for companies headquartered in Toronto with operations in Ethiopia. During those years, he maintained his Ontario Health Insurance Plan card and Ontario driver’s license; held a Canadian passport and held no other passports; owned a car he could use when he came to Toronto; often stayed with one of his sons in Toronto at a condo he had make the downpayment for in his son’s name; owned a rental property he rented to students in Toronto; in 2013, the taxation year in question, received employment income of $202,500 from Allana Potash, a Canadian company, paid in Canadian dollars and deposited in his Canadian bank account; paid no income taxes in any other jurisdiction; had numerous personal relationships in Canada; made RRSP contributions; had a very active Bank of Montreal MasterCard; used a Toronto address as part of his contact information; and spent 110 days in Canada in 2013, while he spent 122 in Ethiopia. He had a home in Ethiopia (initially rented, then owned) where his girlfriend resided. As of 2017 he was again living fulltime in Canada due to political instability in Ethiopia.

In finding that the taxpayer was ordinarily resident in Canada for his 2013 taxation year, MacPhee J stated (at para 48):

[T]he Appellant, in the 2013 taxation year, saw his stays in Canada as his settled routine pattern of life. Both financially and from a family perspective, the most important components of the Appellant’s life were in Canada in the 2013 taxation year.

MacPhee J further stated (at paras 49, 50 and 51):

The Appellant owned a home in Ethiopia…, spent many of his work days there… [, and] had a driver, gardener, companion and pet with him in Ethiopia. These factors do support the fact that he may have also been a resident in Ethiopia in 2013.

… The case law is clear that a party can be a resident in two places at the same time. …

… I find … that the Appellant was a resident in Canada in 2013. If the test were to be mutually exclusive, … I would also find the evidence to be stronger in support of his residence being in Canada, as opposed to Ethiopia.

Sanctuary v. Agence du revenu du Québec, 2020 QCCQ 1903

acquisition of a secondary residence just outside Quebec was insufficient to change the taxpayer’s Quebec residence

The taxpayer, who was a full-time professor at McGill University in Montreal, purchased a home 90 km from Montreal in Lancaster, Ontario, which closed on Dec 18, 2012, and acquired an Ontario driver’s licence on Dec 19, 2012. However, he also renewed his Quebec driver’s licence, and his Quebec health insurance coverage remained valid until March 1, 2013; and both he and his wife continued to work full time in Montreal, only occasionally visiting the Lancaster property on weekends (which initially was not habitable). He continued to own a property in Montreal where he lived until 2017.

He testified that “he never developed a strong sense of belonging to Quebec” and that “his best friend … lived in Ontario” (para. 43). In finding that the taxpayer continued to be resident in Quebec in 2012, Davignon JCQ concluded (at para 76) that the evidence adduced by the taxpayer did “not support a conclusion that he had permanently severed his ties with Quebec, as of December 31, 2012.”

Baril v. Agence du revenu du Québec, 2020 QCCQ 1466

executive with furnished apartments in Calgary and a family home in Montreal failed to establish Alberta residency

In 2010, a corporation (“Garda”), which managed search points at several airports across the country, hired the taxpayer as the Vice President of its aviation division. In 2011, Garda acquired a company that had contracts for security at airports in the Prairies. From the spring of 2012 onwards, the taxpayer had rented a succession of furnished apartments in Calgary. However, she remained the co-owner with her husband of the family home in Montreal, where two of their four children were still under their charge, until 2015 when they took possession of a Montreal condo. In 2012, they also acquired a Florida condo, where they holidayed. She “visited” Montreal much more than her husband visited Calgary.

In finding that the taxpayer had failed to establish a prima facie case that, at the end of each of 2012, 2013 and 2014, her place of ordinary residence was Alberta rather than Quebec, Lewis JCQ stated (at paras. 93-95, 97, TaxInterpretations translation):

The evidence tends to show that Ms. Baril never intended to live in Alberta other than to carry out her duties as Garda required. In 2012, her duties were primarily in Toronto; the evidence is silent as to the details of her duties in 2013 and 2014 in Calgary after the collective agreement was negotiated, except to establish that she spent four months in Montreal in 2014 to participate in the negotiations of the Steelworkers' collective agreement.

Ms. Baril did not develop any social life in Alberta, claiming that her schedule was too busy at work. The Court does not doubt that she worked a lot, but does not believe that this prevented her from having any social life or any relaxation activities.

She did not purchase any furniture or furnishings to fit out the units she occupied, choosing to rent furnished spaces … .

… Finally, the evidence established that Ms. Baril and her spouse chose, during 2012, the residence to which the family would move in 2015.

Adou v. Agence du revenu du Québec, 2020 QCCQ 131

a 3-year departure from Quebec entailed a 3-year cessation of ordinary residence

The taxpayer was assessed to deny credits that he had received for child care credits on the basis that he was not a resident of Quebec on December 31, 2013. He had come to Quebec from the Ivory Coast in 2010. He had worked for a portion of the period thereafter in Montreal, and also prior to September 2013, had studied at a Montreal university and college. On September 26, 2013, he and his spouse and two children left their Montreal apartment and moved to Sudbury, Ontario, where he and his spouse were students. He obtained a diploma in May 2014, returned to Quebec for several months, but then obtained work as a substitute teacher in Toronto (and also took a course there), so that he and his family moved there, where they lived in leased premises, and with his spouse obtaining employment in Toronto.

In 2016, the taxpayer returned to Montreal, where he took further studies, and obtained full-time employment in that region in 2017. His spouse left her Toronto employment to live with him in Montreal.

In finding that the taxpayer had failed to establish his residence in Quebec on December 31, 2013, Breault JCQ stated (at paras. 57-58, 64, TaxInterpretations translation):

[T]o use the expressions … in … Thomson and Reeder cases … Mr. Adou's customary lifestyle and ordinary mode of living, on December 31, 2013, was in the Province of Ontario, as it had been since the end of September 2013, after his departure from Quebec.

A number of factual elements … converge on this concept:

- Mr. Adou's wife and children followed him when he left Quebec, first to Sudbury and then to Toronto;

- he kept no dwelling or second home in Quebec after he left with his family;

- in his first tax return for the 2013 tax year, filed only with the federal government, the Applicant then declared that he was a resident of the province of Ontario on December 31, 2013; …

- a notation in his file with the Régie de l'assurance maladie indicates his departure from Quebec on September 1, 2013 to settle in another province;

- a health insurance card was given to him by the Province of Ontario to be valid as of March 10, 2014 … .

[His] visits to Quebec (during the relevant period) … were clearly only temporary and limited in nature. They were much more a matter of a short stay to take advantage of a vacation period or occasional leave than a necessary presence to devote himself to duties or obligations related to important or even secondary elements of residence in Quebec.

[T]he alleged intention to return to Quebec … is more a reflection or strategy after the fact than something demonstrably supported by proven and probative facts.

Holland v. Canada (Attorney General), 2019 FC 1433

taxpayer could not challenge a CRA residency determination that had not yet been assessed

The taxpayer, who left Canada in 2004 and returned in January 2010, filed a voluntary disclosure application in July 2015 covering the period from 2004 to 2014, but did not file returns for 2005 to 2009, taking the position that for those years he was a non-resident. On April 25, 2018, CRA issued a letter confirming a position taken two years earlier that the taxpayer continued his residency throughout this period.

McVeigh J confirmed the decision of the Prothonotary to strike the taxpayer’s application for judicial review of this letter on the grounds that it was premature (as the voluntary disclosure application was still outstanding, no determination had been made under s. 220(3.1)), and the Minister’s factual determination of residency could be challenged by filing tax returns for those years (which had not yet been done) and appealing assessments thereof to the Tax Court. She stated (at para. 27):

[H]e cannot judicially review this particular tax process when there has been no assessment and no discretionary decision.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 18.5 taxpayer could not challenge a CRA residency determination that had not yet been assessed in the context of a VDP application that had not yet been accepted or declined 313

Addy v Commissioner of Taxation, [2019] FCA 1768, reinstated by [2021] HCA 34 after being rev'd by [2020] FCAFC 135

20-month non-“itinerant” stay under working visa based at a Sydney Australia home was residence

The taxpayer, who was a British citizen aged 23 and had been residing at her family home in Bexleyheath, Kent, came to Australia on a “working visa” on 20 August 2015, and (following extension of her visa) returned to Kent on 1 May 2017 after having stayed most of her time with a friend in a house in Sydney (other than a two-month stint at a horse farm, as required in order to secure her visa extension).

In finding that the taxpayer was “resident” in Australia during this period, Logan J stated (at para. 54):

With respect to the ordinary meaning of the term, I observed in Stockton, at [23], that “both the nature, duration and quality of physical presence in a particular place as well as intention are relevant to determining whether and where an individual is a ‘resident’”. In relation to Ms Addy and in respect of the 2017 income year, she was settled in Sydney at the Earlwood house. It was from there that she ventured to follow her chosen employment. It was her home base for employment, living and social purposes. All of this occurred as a matter of habit and intent. There was nothing itinerant about her life.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 25 the imposition of flat tax on UK working-holiday visa holders contravened the Austr.-UK Treaty non-discrimination clause 483

Stockton v Commissioner of Taxation, [2019] FCA 1679

a US teen who came to Australia for nine months on a “working holiday visa” was a non-resident

The taxpayer was a US citizen who, in her “gap year” after high school, came to Australia for the nine months from 1 September 2016 to 23 June 2017 on a “working holiday visa.” She stayed at numerous different houses in various locales in Australia, mostly secured through AirBnB, and had had two periods of employment, from 1 October 2016 to 25 December 2016 in Brisbane and from 13 February 2017 to 27 May 2017 in Melbourne. She had no prior association with Australia. At the time she left Florida for Australia, she had her own room in the family home, which was retained for her while she visited Australia, and she returned to it after her travels.

The definition of “resident” or “resident of Australia” as found in s 6(1) of the Income Tax Assessment Act 1936 (Cth) (1936 Act) provided:

resident or resident of Australia means:

  1. a person, other than a company, who resides in Australia and includes a person:

  1. who has actually been in Australia, continuously or intermittently, during more than one half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia;

Before finding that the taxpayer was not specifically deemed to be resident in Australia under the (ii) branch of the definition above, Logan J found that she did not reside in Australia under the general wording in the preamble of the definition, stating (at paras 31 and 34):

… Ms Stockton was a paradigm unsettled itinerant during her time in Australia in the 2017 income year. As a matter of deliberate choice, she had no settled employment or place of abode in Australia. …

… Here, the only habit or pattern in Ms Stockton’s choice of accommodation was that of opportunism antithetical not just to settling in any one locale but to settling anywhere at all in Australia while she was here. The type of visa which Ms Stockton sought and obtained gave her the freedom to do this. Ms Stockton’s association with Australia during the 2017 income year was only ever casual.

Development Securities PLC and Others v The Commissioners for HM Revenue and Customs, [2019] UKUT 169 (Tax and Chancery Chamber), rev'd [2020] EWCA Civ 1705

for-hire directors of a Jersey sub exercised central management and control there

A U.K. tax avoidance scheme, entailed Jersey subsidiaries acquiring assets from their UK parent (DS Plc) or its U.K. subsidiaries at prices corresponding to the assets’ historical cost plus an inflation-indexation adjustment and then, after the Jersey-resident directors had resigned, selling those assets back to the DS group at their much lower fair market value, thereby triggering a tax loss that could be used in the DS group. The scheme depended on considering that such subsidiaries had their central management and control in Jersey at the time of the acquisitions. The subsidiaries’ directors consisted of three Jersey-resident “professional directors” (working for a Jersey firm associated with a Jersey law firm) and the UK-resident company secretary of DS Plc (Mr. Lanes). This board met five times (e.g., a 5-hour meeting including a lunch to address matters relating to the transactions), before the resignations occurred.

As to the tests of residence of a subsidiary. the Tribunal stated (at paras. 17-18):

The mere fact that a 100% owned subsidiary carries out the purpose for which it was set up, in accordance with the intentions, desires and even instructions of its parent does not mean that central management and control [CMC] vests in the parent.

… Where a parent company merely “influences” the subsidiary, CMC remains with the board of the subsidiary. It is only where the parent company “controls” the subsidiary, i.e. by taking the decisions which should properly be taken by the subsidiary’s board of directors, that CMC vests in the parent.

In finding that the Jersey subsidiaries were resident in Jersey rather than the U.K. until the time of the resignations, the Tribunal stated (at para 50(8)):

[W]hatever the position as regards Mr Lanes (who may have been prepared to carry out the transactions no matter what), the Jersey directors (i) knew exactly what they were being asked to decide; (ii) did so understanding their duties; and (iii) complied with those duties. The FTT found that Mr Lanes did not influence the Jersey directors … .

Sampson v British Columbia, 2018 BCSC 1503

residence in two provinces before tie breaker rule applied

The taxpayer, described (at para. 126) as “a wealthy CEO of an international energy company,” maintained a 600 square foot apartment within three blocks of the Calgary headquarters of his employer, but spent over half of his Canadian time in B.C., where there was a 10,000 square foot home (near his parents’ home) held in the name of his wife and where their social life was centered. Gaul J found that although the taxpayer was resident both in B.C. and Alberta, B.C. was the taxpayer’s “principal place of residence” under the tie-breaker rule in Reg. 2607, so that he was subject to B.C. income tax. Not only did he spend somewhat more time there, but he also “had a much closer and profound personal tie” with B.C. (para. 123).

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 2607 Calgary executive with a large B.C. home had his “principal place of residence” in B.C. 319

Fono v. Agence du revenu du Québec, 2018 QCCQ 10534

a taxpayer gradually shifting his ties to Ottawa continued to reside in Quebec while he had secondary and personal ties there

The taxpayer, who had become a resident of Quebec in 1995, got a job as an auditor in Ottawa in September 2007 and rented an apartment there, which he occupied until November 30, 2010. He made weekly visits between Ottawa and Quebec sites (mostly in the Montreal area). He maintained his Montreal bank accounts, his Quebec vehicle registration, his interests (through his corporation) in two Quebec rental properties, his membership in the order of Quebec CPAs. It was unnecessary to determine whether Judith, his significant other, was a common law partner (para. 93). Judith remained largely in Quebec (where she was employed) until some time after the acquisition on July 15, 2010 by her and the taxpayer of an Ottawa home in co-ownership. She gave birth to two children of the taxpayer in 2010 and 2015. Pokomàndy JCQ discounted (at para. 85) testimony that their relationship was “stormy and punctuated by ruptures.”

Before finding that the taxpayer continued to reside in Quebec for his 2009 and 2010 taxation years, Pokomàndy JCQ stated (at paras. 69-70, TaxInterpretations translation):

The Court is convinced … that since 2011 this project of going to work in Ontario in order to perfect his English has become a life project that materialized with the residence transfer to this location.

However, the presence of various important and secondary residence links confirmed residence for tax purpose in Quebec until 2010 inclusive.

Rousseau v. Agence du revenu du Québec, 2018 QCCQ 7340

taxpayer, who worked mostly outside Quebec, maintained his family home and other strongest residency ties with Quebec

The taxpayer, who had worked in Quebec until 1988 operating heavy machinery, moved to new employment in Fort McMurry in Alberta in 1999 while his wife (a stay-at-home mother) and their two children remained in his house in Longueuil, Quebec. In the taxation years in question (2003 to 2011, which were assessed by the ARQ on October 24, 2013) he worked for various employers at pipeline sites in Quebec but also other provinces west of Quebec. He was a member of the local Edmonton chapter of the Pipefitters union. Although he had a room in Edmonton, when on vacation, or on leave for s sufficient period, he would return to his home in Quebec.

In finding that the taxpayer was resident in Quebec, Allen JCQ stated (at paras. 51-54, TaxInterpretations translation):

The residency links with Quebec were numerous. He was the sole owner of the family residence located in Longueuil since1992 and bore all of the costs and expenses. This house was occupied by his wife and their two children during essentially all of the period under litigation, and their daughter occupied it from 2010 on. The children … were declared as dependents of Mr. Rousseau for all the taxation years under litigation.

During his stays in Quebec, Mr. Rousseau occupied the house in Longueuil and used one of the two automobiles registered in the name of Mrs. Crépeau. He also had a trailer with a Quebec registration.

He received all his mail at the Longueuil residence address and explained that this choice was made for reasons of practicality. His bank account was at a CIBC branch located in Quebec.

The entirety of the evidence demonstrates that Mr. Rousseau left Quebec solely for work purposes and that he never had the intention to sever his connections with Quebec, which was the place with which he maintained his strongest links between 2003 and 2011.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(1) taxpayer established that failure to file Quebec returns was based on good faith reliance on his accountant’s view of his Alberta residency 149
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.2) Quebec Minister advised to take steps under intergovernmental agreement to avoid double taxation 238

Landbouwbedrijf Backx B.V. v. The Queen, 2018 TCC 142, confirmed on s. 2(1) grounds, remitted for reconsideration on s. 128.1(1)(c) and Treaty grounds 2019 FCA 310

the central management and control of a B.V. with a sole Dutch director was in Canada

A Netherlands couple (the “Backxes”) incorporated the taxpayer as a Netherlands limited liability company, but prior to their immigration to Canada in 1998, they resigned as directors (while remaining as shareholders, and appointed the wife’s sister (“Ms. Van Gorp”), also a Netherlands resident, as the sole director. The Backxes purchased a dairy farm in Strathroy, Ontario, in which the Backxes owned a 51% interest and the taxpayer owned the remaining 49% interest.

In 2009, the Backxes and the taxpayer disposed of their respective interests in the farm to a new corporation formed by the Backxes. They took the position that the taxpayer’s gain was exempt from tax under the Canada-Netherlands Treaty as being from the disposition of a substantial interest in a partnership holding a property (the farm) in which its business was carried on.

In finding that the central management and control of the taxpayer was in Canada, so that its gain instead was subject to Part I tax as a Canadian resident, Smith J stated (at paras 42, 43 and 46):

[I]t is apparent that cogent evidence is required to displace the well-established notion that de jure directors hold primary responsibility for the management and control of a company. Such evidence must clearly establish that the “outsider” … has “effective” or “independent” management and control.

… Ms. Van Gorp admitted that she had no experience in farming and no prior business experience. She accepted the title of director to assist the Backxes and received remuneration of 500 Euros per year from 2007 to 2011, increasing to 1500 Euros thereafter.

…[I]t was the Backxes who assumed effective and independent control of the Appellant. In most if not all instances, Ms. Van Gorp was not even copied with the correspondence. This quite clearly suggests that she was a mere nominee who carried out clerical and administrative functions on behalf of the Backxes.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(c) no application of s. 128.1(1)(c) as central management and control had been in Canada from the time of the investment 284
Tax Topics - Treaties - Income Tax Conventions - Article 4 Netherlands corporation with central management and control in Canada was not resident in the Netherlands for Treaty purposes 443

895410 Alberta Ltd., fiduciaire de la Fiducie Haifa v. Agence du revenu du Québec, 2018 QCCQ 2581

trust with an inactive Alberta trustee whose director could be replaced at will by the Quebec patriarch was resident in Quebec

The Haifa Trust was settled in 2000 by a tax advisor (Mr. Marcinski) to Mr. Zaffir, a Quebec resident. Its sole trustee was an Alberta corporation (“Alberta Ltd.”) of which Mr. Zaffir was the sole shareholder and whose initial sole director was an Alberta-resident acquaintance of Mr. Marcinski whom Mr. Zaffir had not met. The beneficiaries of the Trust were Mr. Zaffir, his wife and their two children. The Trust invested in real estate, all of it situate in Quebec excepting one Ottawa property. The real estate was managed by a corporation (“Gestion Amcor”) whose sole director was Mr. Zaffir and whose sole shareholder was a holding company of which Mr. Zaffir was the sole director and shareholder. Mr. Zaffir was, under the Trust deed, the “protector” of the Trust, so that he could replace the sole trustee at any time.

In connection with finding (at para. 49, TaxInterpretations translation) that “the real control of the Haifa Trust was exercised by Mr. Zaffir in Quebec,” Lavigne JCQ stated (paras.50, 52):

By way of illustration of the passiveness of the trustee, Alberta Ltd, in the management and effective control of the Haifa Trust … Mr. Patterson, who was the director of the trustee Alberta Ltd. for 10 years, never sent an invoice for his services or those of Alberta Ltd. …

That Mr. Zaffir was the sole shareholder of Alberta Ltd. and in that capacity he had the power to name or dismiss the director of Alberta Ltd., coupled with the fact that Mr. Zaffir was also the “protector” of the Haifa Trust, is sufficient to conclude that the effective control of the Haifa Trust was in the hands of Mr. Zaffir, a resident of Quebec and on that basis, the taxes of the Haifa Trust were required to be paid in Quebec.

She further stated (at para. 85):

Alberta Ltd. and its director, Mr. Gartaganis [a retired Alberta government employee without real estate expertise who was a friend of Mr. Zaffir and was appointed as Mr. Patterson’s replacement following the latter’s death] did not have the real management and control of the Haifa Trust. It is Mr. Zaffir who controls all the real estate activities that generate the income of the Haifa Trust.

Boettger v. Agence du revenu du Québec, 2017 QCCA 1670

trust with an Alberta trustee who was a mere “implementer” of the settlor’s wishes, was resident in Quebec

An Alberta trust was found by the Court of Quebec below to be resident in Quebec. The settlor and beneficiary (his wife) were unfamiliar with the sole trustee (an Alberta lawyer), who instead was a contact of the Montreal law firm (and who could be removed by the settlor at any time). The most significant act of the trustee was something he was directed to do under the trust deed and thereafter there was essentially nothing for him to do other than send in the trust tax return along with payment. Lavigne J stated (at para. 82, TaxInterpretations translation): "The role of the Trustee was not to manage and grow the assets of the NS Trust but rather to hold them passively and follow the detailed steps in the Plan dictated by the [professional advisors]." See the more detailed summary of this decision.

St-Pierre JCA found no reversible error (and, in fact, appeared to agree with all the significant findings, except respecting any relevance of the tax avoidance motive, as discussed below). After referring to the Duke of Westminster and before finding that Lavigne J’s references to the tax motivation for the trust did not vitiate her finding that it was resident in Quebec, St-Pierre JCA stated (at paras. 53, 55-56, TaxInterpretations translation):

If the Judge decided that the residence of the trust was in Quebec, this was not by reason of the underlying tax motivation for its establishment, but because the established facts demonstrated that the control of its actual activities and that the management of its affairs rested practically (in reality) in the hands of its settlor, and not in those of the trustee who, in fact, acted only as the implementer ["exécutant"]. …

The tax motivation is a fact.

This fact constitutes a backdrop to take into account respecting the trust and its actual activities. [emphasis in original]

Development Securities (No. 9) Ltd & Ors v HMRC, [2017] UKFTT 565 (TC), rev'd [2019] UKUT 169 but FTT decision confirmed at [2020] EWCA Civ 1705

a Jersey sub, whose board approved in Jersey a decision contrary to the sub’s interests, resided in the U.K.

The appellants (the “Jersey companies”) were incorporated in Jersey as subsidiaries of a U.K.-resident property development and investment company (“DS Plc”) for the purpose of permitting the DSG group to crystallise latent capital losses on assets on a basis that permitted the losses to be increased by indexation for inflation. The board of directors of each Jersey company comprised three Jersey-resident directors (all of them providing their services as director to numerous other non-DSG companies as well) and one U.K.-resident director from the DSG group.

Under the scheme, the DSG UK member companies granted call options to the Jersey companies to acquire the subject property, with those options then being exercised (funded with contributions from DS plc). The price payable on exercise, which equalled to the relevant DSG company’s historic base cost in the relevant asset for capital gains purposes plus indexation accrued to that time, was considerably in excess of the then market value. The Jersey directors then resigned and U.K. directors were appointed with a view to the Jersey companies becoming UK tax resident from that time. Shortly after, steps were taken for the Jersey companies to sell or dispose of the relevant assets thereby triggering a capital loss. The only issue was whether the Jersey companies were UK tax resident prior to the resignation of their Jersey directors.

Morgan J first noted (at paras 406, 412):

…In reality, … the [Jersey] companies’ real business was to undertake the parent’s plan for the realisation of enhanced capital losses through the acquisition of assets at an overvalue under call option arrangements.

… It is inherent in the uncommercial nature of what was proposed or, in other words, that lack of any commercial benefit … that the board were undertaking to implement the necessary steps from the outset on the “say so” of the parent (subject to the legality issue). …

In finding that the Jersey companies had their central management and control in the U.K. at all relevant times, so that the appeal was dismissed, she concluded (at paras 426 and 430):

Unlike Wood v Holden… this was not a case where the board considered a proposal and, having taken appropriate advice, decided that it was in the best interests of the companies to enter into it. Given that the transaction was clearly not in the interests of the companies and indeed could only take place with parental approval, the inescapable conclusion is that the board was simply doing what the parent, DS Plc, wanted it to do and in effect instructed it to do. In the circumstances, the line was crossed from the parent influencing and giving strategic or policy direction to the parent giving an instruction. The Jersey board were simply administering a decision they were instructed to undertake by DS Plc, in checking the legality of the plan and then administering the other consequent actions prior to handing over completely to the UK group.

… In effect, the Jersey board merely rubber stamped the decision to move control back to the UK, having fulfilled the terms of their engagement.

Robinson v. Agence du Revenu du Québec, 2016 QCCQ 11066

individual who went to work full-time in Alberta remained resident in Quebec

The taxpayer was born in Québec and worked and studied there until 2007, when she left to work in Alberta in thermal insulation systems. The taxpayer was separated from her spouse, and initially her son came with her, but after a few months her son returned to live with the taxpayer’s mother in Québec for his remaining secondary-school years in premises which the taxpayer co-leased. The taxpayer initially rented an apartment in Alberta, but only kept it for a few months, and thereafter stayed at employer-provided lodges at the various work sites. The taxpayer returned to Québec for several weeks each winter (for her son’s birthday) as well as several weeks each summer.

In finding that the taxpayer resided in Québec on December 31 of each of the 2007, 2008, 2009 and 2010 taxation years, Bourgeois JCQ found that the taxpayer failed to demonstrate that she had established a residence, other than in Québec, during the period in issue, and that she maintained significant ties with Québec as summarized above (and also noting that in 2013, she had purchased a condo in Québec and had used a Québec address for various third-party communications including for purposes of maintaining her Québec health card).

Bywater Investments Ltd. v Commissioner of Taxation; Hua Wang Bank Berhad v Commissioner of Taxation, [2016] HCA 45

place of directors’ meeting given little weight if they are not the true decision makers

All but one of the directors of three appellants were resident in Switzerland, with all the directors’ meeting being held in Switzerland. The directors of the fourth appellant (Hua Wang Bank Berhad), a Samoa company, were employees of a Samoan international trustee and corporate service provider. The appellants traded shares on the Australian Stock Exchange. An individual resident in Australia (Mr Gould) had been found by the primary judge (Perram J) to be the indirect beneficial owner of the appellants, although Mr Gould had gone to considerable lengths to disguise this fact.

Gordon J in the High Court stated (at para 89):

All deliberative decisions by each appellant company to buy and sell Australian shares on the Australian Securities Exchange ("the ASX") were made by Mr Vanda Gould, who was based in Sydney. The companies' officers were outside Australia, but they did no more than "rubber-stamp" the decisions made by Mr Gould in Australia.

Perram J had further found that “’the directors of the taxpayers exercised no independent judgment in the discharge of their offices but instead merely carried into effect Mr Gould’s wishes in a mechanical fashion.’” (This finding was "subject only to the slight and relvantly inconsequential difference that Bywater [one of the appellants] was incorporated in the Bahamas and did not purport to hold any directors' meeting [as that as not required under Baahamaian corporate law] (para. 27).")

The High Court affirmed the findings at both levels below that each appellant was a “resident of Australia” as defined in s 6 of the Income Tax Assessment Act 1936 (Cth), which included:

a company…which, not being incorporated in Australia, carries on business in Australia, and has…its central management and control in Australia… .

Before so concluding, the Court stated (at paras 41, 84):

Ordinarily, the board of directors of a company makes the higher-level decisions which set the policy and determine the direction of operations and transactions of the company. Ordinarily, therefore, it will be found that a company is resident where the meetings of its board are conducted. But, contrary to the appellants' submissions, it does not follow that the result should be the same where a board of directors abrogates its decision-making power in favour of an outsider and operates as a puppet or cypher, effectively doing no more than noting and implementing decisions made by the outsider as if they were in truth decisions of the board. Accordingly, the question in this case is whether, in view of Perram J's findings concerning the role which Gould played and the absence of substantive decision-making by the boards of the appellants, the fact that the boards of the appellants were located abroad was sufficient to locate the residence of the appellants abroad.

…[T]he rejection of the appellants' formalistic approach, in favour of the test of fact and degree adopted in Bullock [Bullock v Unit Construction Co Ltd [1959] Ch 315 ] and Esquire Nominees [Esquire Nominees [1973] HCA 67; (1972) 129 CLR 177], is fortified by the approaches adopted in other common law jurisdictions. In Fundy Settlement v Canada [[2012] 1 S.C.R. 520 at 526 [15]] the Supreme Court of Canada applied the same test of residence to a trust as to a company, namely "where the central management and control of the trust actually takes place". Accordingly, because the non-resident corporate trustee in that case deferred to the recommendations of Canadian resident beneficiaries in the substantive decisions made regarding the trusts, it was held that the trusts were resident in Canada. Similarly, in Hertz Corp v Friend [(2010) 559 US 77], the Supreme Court of the United States held that, in determining whether a corporation is a "citizen" for federal jurisdictional purposes, the statutory criterion of "principal place of business" is …"best read as referring to the place where [the] corporation's officers direct, control, and coordinate the corporation's activities. It is the place that Courts of Appeals have called the corporation's 'nerve center' … and not simply an office where the corporation holds its board meetings… .”

Herman Grad 2000 Family Trust v. Minister of Revenue, 2016 ONSC 2402

trusts, whose Alberta-lawyer trustees did not make substantial decisions, were resident in Ontario

The first taxpayer was a discretionary family trust (the “Family Trust”) whose beneficiaries were the three daughters of Mr. Grad (“Grad” - an Ontario resident and the CEO and sole director of the Grad group of companies) and his wife (“Marya”). The second taxpayer was a trust settled by Grad for the benefit of Marya (the “Spousal Trust”.) At most of the relevant time, the trustees of both trusts (the “Trusts”) were two Alberta-resident lawyers. The Trusts held investment assets, mostly comprising securities, short-term cash instruments, shares of group companies and, as discussed below, a partnership interest. In August 2006, the trustees of the Family Trust transferred a directly held portfolio on a rollover basis to a limited partnership (“CAL Equities”) in consideration for a limited partnership interest. Both before and after this transfer, day-to-day management of the portfolio was delegated to professional discretionary investment managers.

Before finding that the Trusts were managed and controlled by Grad and the CFO of the Grad group of companies (“Handelsman” – also an Ontario resident), so that the Trusts were resident in Ontario rather than Alberta, Wilton-Siegel J noted (at para. 93) that the in the context of an investment trust “the principal decisions taken by trustees pertain to the investment of the assets of the trust and distributions to beneficiaries,” and stated (at paras 94, 96, 103):

… [T]he Trustees were not skilled in investment matters and did not profess any skill in this regard. …

[M]anagement and control of a trust may rest with a trustee who has little investment experience provided that the trustee has the power to retain others for advice and remains the ultimate decision-maker. …

In my view, the mere retention by trustees of the ability to retract a prior delegation of investment decision-making authority is not sufficient to establish that management and control of the investments of the trust is exercised by the trustees where investment decisions are actually taken on a day-to-day basis by, or are otherwise subject to the control of, the delegee.

Wilton-Siegel J found that Grad had effective control over investments of the Trusts stating, for instance, respecting the Cal Equities arrangement (para 125):

… [T]he effect of the Cal Equities transaction was to place oversight responsibility for the investment managers firmly in the hands of Grad. He was the sole shareholder, director, and officer of 126 which, as the general partner of CAL Equities, controlled CAL Equities and made all decisions on behalf of the limited partnership, including all decisions with respect to its assets. ...

Wilton-Siegel J found (at para. 192) that “the decisions regarding the investment of the liquid funds of the Trusts were taken by Grad, or by Handelsman on behalf of Grad, rather than by the Trustees during the 2007, 2008, and 2009 taxation years,” stating (at para 186):

The [Trustees'] letters of authorization represented a “rubber-stamping” of decisions taken by Handelsman and were no more than a necessary formality required by the T-D rather than evidence of the exercise of management and control by the Trustees over these investment decisions.

As to the closely-held investments, Wilton-Siegel J found (at para 196):

… By appointing Grad the sole director of Markham and Herrad, the Trustees effectively gave Grad the power to control the payment of any distributions from Markham Suites and Herrad and, therefore, the power to control the principal sources of income of the Family Trust and the Spousal Trust, respectively.

Bywater Investments Ltd. v. Commissioner of Taxation, [2015] FCAFC 176, aff’g sub nom. Hua Wang Bank Berhad v. Commissioner of Taxation [2014] FCA 1392, aff'd [2016] HCA []

directors exercised no independent judgment

Although the board meetings of the taxpayers were held outside Australia (in London, Switzerland or Samoa), the Court accepted that each taxpayer’s central management and control was in Sydney, where an accountant (Mr. Gould, who appeared to be the ultimate owner, notwithstanding false testimony to the contrary) was contended by the Commissioners to be “pulling all of the strings” (para. 10). Accordingly, each taxpayer was a “resident of Australia” as defined in s 6 of the Income Tax Assessment Act 1936 (Cth), which included:

a company…which, not being incorporated in Australia, carries on business in Australia, and has…its central management and control in Australia… .

The Court referred (at paras. 7-9) inter alia to the central management and control test enunciated in De Beers Consolidated Mines Limited v Howe [1906] AC 455, at 458, the statement in Koitaki Para Rubber Estates Limited v. Federal Commissioner of Taxation (1941) 64 CLR 241; [1941] HCA 13, 248–9 (CLR) that “’the crucial test is to ascertain where the real business of the company is carried on, not in the sense of where it trades but in the sense of from where its operations are controlled and directed,’” the distinction drawn in Unit Construction Co Ltd v Bullock [1960] AC 351 “between those with an ability to influence others who make the decisions of the company and those who may be usurping that function or who are directing those appearing to act for the company” and to the “critical finding” of the trial judge in Wood v Holden [2006] 1 WLR 1393; [2006] EWCA Civ 26 “that the effective decisions had been made by the directors and…their participation was not ‘merely going through the motions of passing and signing documents.’”

The Court then accepted (at paras. 11) the findings of the primary judge that “the real business of each taxpayer was conducted from Sydney by Mr Gould,” and that “’the directors of the taxpayers exercised no independent judgment in the discharge of their offices but instead merely carried into effect Mr Gould’s wishes in a mechanical fashion.’”

Boettger, trustee of Nancy Smith Spousal Trust v. ARC, 2015 QCCQ 7517, aff'd 2017 QCCA 1670

Alberta trustee merely followed directions in Montreal tax plan

A Quebec-resident individual ("Gibeault"), who was the sole shareholder of a Quebec corporation ("Cetco"), exchanged a portion of his common shares for non-voting non-cumulative redeemable retractable Class B preferred shares of Cetco, and settled an Alberta spousal trust for his wife (the "NS Trust") with a portion of the preferred shares. The trustee ("Boettger") was unknown to Gibeault and was an Alberta lawyer contact of Gibeault's Montreal law firm ("BCF"). The NS Trust, Cetco and Gibeault then engaged in various transactions which resulted in the receipt of a deemed dividend by the NS Trust (and the generation of a dividend refund to Cetco) as a result of a redemption in its hand of preferred shares, and with the NS Trust ending up holding a residual holding of preferred shares of Cetco and a non-interest bearing demand promissory note of Cetco. The NS Trust subsequently demanded payment of the promissory note, in order to fund the payment of income tax on the deemed dividend received by it.

After quoting Fundy Settlement and in finding that the NS Trust was resident in Quebec rather than Alberta, Lavigne J stated (Tax Interpretations translation, paras. 73-85):

The NS Trust did not engage in any economic activity in Alberta, did not carry on any business and had no employees.

…Despite the presence of articles according ample powers to the Trustee, all the acts which the Trustee had the power to effect were guided by the Trust Deed. Articles 2.2, 2.3 and 2.4 are telling.

Article 2.2 provided for the payment of the expenses of the NS Trust.

Article 2.3 provided the net income of the NS Trust must be paid to the Beneficiary, during her lifetime, in annual payments "or more frequently in the discretion of the Trustee."

Article 2.4…provided that the proceeds of the redemption of the Class B shares of Cetco…must be distributed to the Beneficiary, net of taxes, within 30 days.

…. Gibeault could, qua "Protector" remove the Trustee and replace him… . These [Protector] articles testify to the de facto control that… Gibeault exercised over the Trustee.

…[R]especting the Class B shares which were the principal asset of the NS Trust, Cetco, controlled by … Gibeault, always had the right to retract these shares… .

…Mr. Boettger was certainly not chosen to "manage" the NS Trust as his powers to manage were …limited.

…The acts…of the Trustee were predetermined by the lawyers BCF and the accountants RCGT who were acting for Cetco, the settlor… Gibeault and the Beneficiary Nancy Smith.

…The role of the Trustee was not to manage and grow the assets of the NS Trust but rather to hold them passively and follow the detailed steps in the Plan dictated by the BCF lawyers and the RCGT accountants… .

All these facts establish that the real control of the NS Trust is in the hands of … Gibeault and of Cetco, two residents of Quebec, who acted through their agents, BCF, RCGT and Roy D. Boettger.

Discovery Trust v. MNR, 2015 CanLII 34016 (NL SCTD)

trust resident in province where corporate trustee (Royal Trust) reviewed proposed actions

Charles Dobbin, the founder of CHC Helicopter Corporation ("CHC"), settled a trust, whose trustees and beneficiaries were his children. The trust was issued non-voting common shares of the holding company ("DHI") for CHC in a 2002 estate freeze transaction. In 2006 (shortly before the death of Charles Dobbin), it moved its assets to Alberta at the same time as the Royal Trust Corporation of Canada was appointed as the successor trustee (which performed its obligations through its Calgary branch). In 2008, the trust received (in the form of preferred share redemption proceeds and dividends) proceeds from the sale by DHI of CHC.

The trust was resident in Alberta in 2008. Essentially all aspects of the participation of the trust in various transactions (e.g., a pipeline transaction, a continuance of DHI to Alberta and its amalgamation and amendments to its articles, and various transactions consequent on the CHC sale) were implemented on the recommendation of the children (often acting through legal counsel ("Osler") or through a friend of Charles Dobbin ("Stanford") residing in Newfoundland, who was appointed as a board member or officer to various group entitles following Charles Dobbin's death). However, in each case,

Royal Trust…reviewed the Trust document to ensure that the proposed approval was within its authority and then considered whether there were any negative consequences for the beneficiaries" (para. 34).

Thompson J stated (at para. 41):

These did not suggest delegation of authority. Independence of the Trustee is maintained by its review of the transaction, acquiring explanation sufficient that an informed decision can be made, ensuring the decision has no negative consequence and is in the best interests of the beneficiaries.

Accordingly, the beneficiaries did not have management and control of the trust.

Bower v. The Queen, 2013 DTC 1152 [at 854], 2013 TCC 183 (Informal Procedure)

Bocock J found that the taxpayer was ineligible for the Canada child tax benefits as he was no longer a Canadian resident. He only visited Canada four times since moving to Indonesia, for no more than eight weeks each time, which Bocock J characterized more as vacations than maintaining ties to Canada. Bocock J also noted that, although the taxpayer maintained Canadian bank accounts, he admitted that he did so to assist him with daily living in Indonesia, where the banking system was inadequate.

Dysert v. The Queen, 2013 DTC 1070 [at 373], 2013 TCC 57

The taxpayers were middle-aged "all American" certified cost estimate professionals, with no significant previous exposure to Canada, who came to Alberta under two-year contracts (later extended by two years) to work on the Syncrude project. Although they acquired and modestly furnished apartments in Alberta, they maintained their substantial homes in the U.S. where their families stayed (other than short visits to Alberta) and otherwise maintained their social ties and financial assets in the U.S. In finding that the taxpayers were not ordinarily resident in Canada, Boyle J. stated (at para. 33):

Further, they virtually only took on such ties to Canada as were reasonably needed to fulfill the CCG business contract with Syncrude in an economically reasonable and commonsensical, practical manner such as (i) rented apartments with early termination provisions (ii) locally leased cars (iii) modest furnishings most all of which were donated to neighbourhood charitable thrift shops before leaving Canada; and (iv) single local chequing account used for local living expenses.

Edwards v. The Queen, 2013 DTC 1025 [at 124], 2012 TCC 430 (Informal Procedure)

VA Miller J found that the taxpayer, who spent an equal amount of time in Canada and the UK, was a Canadian resident based on her personal ties to her daughter who, due to a custody assessment, lived in Edmonton. VA Miller J stated that "her settled routine was that she worked in the UK and she returned to Canada where she resided with her daughter" (para. 23).

Mullen v. The Queen, 2012 DTC 1154 [at 3358], 2012 TCC 139 (Informal Procedure)

The taxpayer was reassessed in respect of income from stock options exercised in 1997, 1999, and in 2001. He argued that he was not a Canadian resident in those years.

V.A. Miller J. accepted the taxpayer's argument only in respect of 1997, when he was employed in China, sold his house in Canada (but kept his cottage in Belleville, Ontario), and maintained a lease in a Chinese hotel suite, where he lived with his wife during his employment period. (The taxpayer's appeal for 1997 was nevertheless dismissed pursuant to 115(1)(a)(i) because he received the stock options in the course of employment in Canada.) The taxpayer's employment in China was terminated and the taxpayer moved back to his Belleville estate for over a year.

The taxpayer was a Canadian resident in 1999 and 2001, and V.A. Miller J. found that his assertions to the contrary amounted to willful neglect, for which he was liable for 50% penalties under s. 163(2). The taxpayer's severing of his ties to Canada was superficial - he ostensibly sold the Belleville estate to his children in exchange for a mortgage, but never actually requested payment from them. The core of his social and family life, as well as his finances, remained in Canada, and his personal investment in China, and subsequently Thailand, was only enough to maintain a particular lifestyle during his periodic sojourns there.

Daruwala v. The Queen, 2012 TCC 257 (Informal Procedure)

Woods J. stated (at paras. 25-26):

The term "residence" has a flexible meaning which is dependant on the context in which it is used. ...

The term "residence" as used in the context of Thomson applies in determining the liability of an individual to income tax. The focus in this context is on the individual rather than on a property and a myriad of personal factors involving the person's customary mode of living are looked at. This include things such as social and economic ties. It does not make any sense to apply this test in the context of s. 191(1) [of the Excise Tax Act].

The context of s. 191(1) was to make the builder of a substantially completed complex liable for GST if it arranged to lease or license the complex to an individual as a place of residence.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 191 - Subsection 191(1) informal arrangement included 168

Vegh v. The Queen, 2012 DTC 1131 [at 3160], 2012 TCC 95 (Informal Procedure)

Boyle J. found that the taxpayer ceased to be a Canadian resident in 2000 when he moved to China to teach English - a stay in which he met and married his wife, had two sons, and which lasted seven years. He had few ties to Canada at the time of departure, being single and unattached, and there was little evidence to suggest an intention to return. While he continued to keep an eye on Canadian politics, it was clear that the taxpayer was developing substantial ties to China, including stable employment. The taxpayer's testimony to the contrary was inconsistent with documentary evidence of his employment, which threw his credibility into question. The taxpayer was therefore denied Canada child tax benefits in respect of the time he was in China.

Snow v. The Queen, 2012 DTC 1116 [at 3087], 2012 TCC 78 (Informal Procedure)

Woods J. found that the taxpayer's stay in New Zealand, which she intend to be only transitory while her husband completed his master's degree, ceased to be of a transitory nature when he decided to continue in New Zealand as a doctoral student. At that point, they ceased to be Canadian residents and became New Zealand residents. Referring to the "customary mode of life" component of Thomson, Woods J. stated (at para. 23) that this "longer term commitment, coming after the family was in New Zealand for three years, suggests that the family was likely settled into life in New Zealand as their customary mode of living."

Fatima v. The Queen, 2012 DTC 1087 [at 2923], 2012 TCC 49 (Informal Procedure)

The taxpayer moved to Canada in August 2005, joining her husband who had moved from Pakistan to Canada in 1997. In February 2006 she moved back to Pakistan until May 2008 with her children and her husband, who had accepted a two-year work contract. She then returned to Canada.

Woods J. found that the taxpayer was a resident of Canada at all times after August 2005, notwithstanding that her initial stay in Canada was only six months. She stated (at paras. 21-22):

The CRA concluded that [the taxpayer's husband] was subject to tax in Canada on his worldwide income during this period. Although this is not determinative of Mrs. Fatima's residence status, one would generally expect spouses to reside in the same country for tax purposes unless they lived apart for some reason.

The Crown referred in support of its position to a residency questionnaire signed by Mrs. Fatima which failed to reveal any ties to Canada. ... Such forms often do not present a complete picture. In reality, Mrs. Fatima had established significant ties to Canada before the family went to Pakistan for a limited period.

The taxpayer was therefore entitled to the child tax benefit.

R (Davies) v. Revenue and Customs Commissioners, [2012] 1 All ER 1048, [2011] UKSC 47

The first group of taxpayers (Davies and others) were successful English property developers who decided to extend their property development activities to Belgium, which they began to conduct through a newly-incorporated Belgian company of which they were equal shareholders. Although they began to work full-time for the Belgian company and resided at furnished apartments in Brussels, they did not sell their homes in England where their wives (and, in one case, daughter) continued to stay, they returned to England frequently and they continued their duties as non-administrative directors of their English property development company and with the Swansea Rugby Football Club. The residency facts respecting the second taxpayer (Gaines-Cooper) were different but raised the same issues.

The taxpayers' primary submission was that the Inland Revenue administrative position on individual residence (contained in booklet IR20) contained a more favourable interpretation of the test of when an individual ceases to be resident and ordinarily resident in the UK than was reflected in the ordinary law, and that the court should give effect to their legitimate expectation that this more favourable interpretation should be applied to them.

The taxpayers' submissions were rejected, on the grounds that the booklet communicated a requirement for "a distinct break" from the UK (para. 45), which the taxpayers had not satisfied. Before so concluding, Lord Wilson SCJ discussed whether the taxpayers had ceased to be ordinarily resident in the UK under the ordinary law - or, to be more precise, whether they had ceased to be resident in the UK and, if so, whether they were deemed to continue to be resident in the UK under a statutory provision that applied when a taxpayer, who had been ordinarily resident in the UK, has left the UK for the purpose only of occasional residence abroad. After considering the "settled or usual abode" test in Levene, he stated (at para. 20) that although the ordinary law required that, in order to become non-resident in the UK or, at any rate, to avoid being deemed by the statutory provision to still be resident in the UK, "the ordinary law requires the United Kingdom resident to effect a distinct break in the pattern of his life in the United Kingdom." However, a reference in the decision under appeal

to the need in law for 'severance of social and family ties' pitch[ed] the requirement, at any rate by implication, at too high a level.

He then stated (at para. 21):

It became clear from decisions like IRC v. Combe [(1932) 17 TC 405] that, if a taxpayer left the United Kingdom in order to pursue employment abroad which was full-time, it was likely not only that he would cease to be a United Kingdom resident but also that he would escape being deemed still to be a United Kingdom resident under the statutory provision. For, from the fact that the employment was full-time, it was likely to follow that he had made a distinct break in the pattern of his life in the United Kingdom.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) concessions for non-collection with overall revenue enhancement objective 221

Hamel v. The Queen, 2012 DTC 1004 [at 2518], 2011 TCC 357

Tardif J. found that the taxpayer ceased to be resident in Canada following his departure from Canada for Qatar in 2007. His Qatar work permit expired in August 2010, after which he had to leave Qatar. Indications that he had severed his ties with Canada included that he did not apply for a new Canadian driver's licence when it was suspended, he relinquished his health card, disposed of his Canadian property, was separated from from his wife, and in general appeared to make a definite decision to leave Canada after much reflection. Other factors including his several visits per year back to Canada (each for a stay of up to about two week) to see friends and family did not establish Canadian residence.

Perlman v. The Queen, 2011 DTC 1045 [at 199], 2010 TCC 658

In determining whether the taxpayer was eligible for a Canada child tax benefit, Boyle J. found that the taxpayer was resident in Canada for the 16 years he spent in full-time rabbinical studies in Israel. The taxpayer's family had Israeli health insurance, the children went to school in Israel, and taxpayer's wife occasionally worked in Israel during the study period. However, the taxpayer remained a Canadian citizen with a Canadian passport. He intended to accept a faculty position, offered by a Canadian school, upon his return. He voted in Canadian elections, filed Canadian tax returns, and maintained personal relationships, financial accounts, drop-boxes, and an apartment in Canada.

While the taxpayer's studies in Israel were very extended, Boyle J. found at paras. 32-33 that it would be inappropriate for the court to set a specific time limit on studies abroad. Therefore, the taxpayer could not lose Canadian residency on the basis of time alone.

Charafeddine v. The Queen, 2010 DTC 1281 [at 3953], 2010 TCC 417 (Informal Procedure)

The taxpayer's children were abducted by her husband in Lebannon, and were being held there while the taxpayer tried to effect their return to Canada. At issue was whether the children "resided" with the taxpayer in Canada and whether the taxpayer was the one who "primarily [fulfilled] the responsibility for [their] care and upbringing", as per s. 122.6. Sheridan J. concluded that both criteria were met: "There is something fundamentally flawed with the notion that children wrongfully detained in a foreign country can be 'settled' there."

On similar reasoning, Sheridan J. concluded that the children and the taxpayer resided together in Canada for the year the taxpayer spent in Lebannon trying to recover her Children.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 122.6 - Eligible Individual children's being abducted and held in foreign country by estranged spouse did not disrupt CCTB eligibility 225

Bensouilah v. The Queen, 2010 DTC 1018 [at 2624], 2009 TCC 440 (Informal Procedure)

The taxpayer, who had been a resident of Canada for six years, moved to a job in Saudi Arabia for the three taxation years in question, with most of his salary being remitted to his family who stayed in Canada and with the taxpayer returning to Canada for 30 vacation days a year and maintaining various other connections with Canada. He continued to be resident in Canada (and was liable for gross negligence penalties for not reporting his income from his job in Saudi Arabia).

1143132 Ontario Limited v. The Queen, 2009 DTC 1312, 2009 TCC 477

The central management and control of a Barbados corporation was in Barbados rather than Canada, notwithstanding that its directors in Barbados were described as being inactive, given that there was no evidence that these directors did not, in fact, manage the corporation and it was consistent with the very limited functions of the Barbados corporation that what they did was not much more than the bare minimum.

Lingle v. The Queen, 2009 DTC 1705, 2009 TCC 435, aff'd 2010 DTC 5100 [at 6932], 2010 FCA 152

The taxpayer, who was a U.S. citizen, was found to have a centre of vital interest in Canada rather than the United States given that it was admitted that he normally lived in Canada.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 4 241

Minin v. The Queen, 2008 DTC 4463, 2008 TCC 429

The taxpayer, who was working on a succession of small jobs in the United States and whose children continued to live with his mother and his separated wife in Canada, was found to continue to reside in Canada given that his intention would have been to remain as a resident of Canada because this would be important to him to be able to sponsor his mother under Canadian immigration laws.

Filipek v. The Queen, 2008 DTC 4139, 2008 TCC 351

The taxpayer, an Air Canada pilot who spent approximately two months a year in the Turks and Caicos primarily on recreation, and approximately 100 days per year in the Vancouver area (including in the Point Roberts Peninsula in the State of Washington, where he claimed to be spending a large portion of those 100 days camping) was found to be ordinarily resident in Canada given that his work routine as a pilot was centered in Vancouver and given that he had ready access to his in-laws' home in British Columbia a short distance from Point Roberts.

Mullen v. The Queen, 2008 DTC 3892, 2008 TCC 294 (Informal Procedure)

The taxpayer, who spent most of the taxation years in question in the Far East, was found nonetheless to be ordinarily resident in Canada in light inter alia of the fact that he had a considerable emotional and economic investment in a house in Belleville title to which had remained in the family.

Johnson v. The Queen, 2007 DTC 1022, 2007 TCC 288

The taxpayer was ordinarily resident in Canada in the year within the meaning of s. 250(3) given that his Canadian employer was obligated to return him to Canada when his assignment in Dubai was concluded and given that, during the years in question, the taxpayer had no substantial ties with any location other than Canada.

Barton v. The Queen, 2007 DTC 712, 2007 TCC 222

The taxpayer was found to be resident in Canada for a four-year period during which he was working in the United States given that the evidence indicated he was in the United States for work only and that he did not have any other ties there, whereas his wife and daughter remained in Canada with him visiting them there at least once a month.

Laurin v. The Queen, 2007 DTC 236, 2006 TCC 634

An Air Canada pilot who had shared accommodation with other pilots, and had financial investments in the Turks and Caicos Islands and a mailing address, driver's licence and financial links to Florida, was able to establish that he was not a Canadian resident given that he had broken up with his Canadian girlfriend, gotten rid of his house, cars, licences and health insurance there and that when he came to Canada he stayed with friends. Bowman C.J. stated (at p. 242) "residual friendships and employment connections do not create residency".

Hauser v. The Queen, 2005 DTC 1151, 2005 TCC 492, aff'd 2006 DTC 6447, 2006 FCA 216

An Air Canada pilot who took up residence in the Bahamas continued to be resident in Canada given that his work routine (which was centred on Pearson Airport) and family connections caused him to spend more than one-third of his time in Canada (during which time he would stay at his mother-in-law's apartment in Canada) and that he used a Canadian bank account for most of his banking.

Yoon v. The Queen, 2005 DTC 1109, 2005 TCC 366

The taxpayer was resident in South Korea rather than Canada in her 2001 taxation year. Although she had a residence in British Columbia available to her, she spent more time in South Korea, her social, cultural and religious ties in South Korea were much more extensive than those in Canada, and she had a two-year work contracting commencing in January 2001 that obliged her to perform her services in South Korea.

Wood v. Holden (2005), 7 ITLR 725, [2005] EWHC 547 (Ch. D)

A corporation was found to be resident in the Netherlands, under the central management and control test, given that the only acts of management and control of the corporation (being the making of various board resolutions and the signing and execution of documents) all took place in the Netherlands. Park J. stated (at p. 764) that:

"Price Waterhouse, or indeed virtually any professional firm, would resist strongly any suggestion that, because a client is relying on them for, and is following, professional guidance which they are providing on a sophisticated scheme which extents over several months, therefore their offices are a place of effective management of the client."

Bujnowski v. The Queen, 2005 DTC 247, 2005 TCC 90 (Informal Procedure)

The taxpayer, who was a Canadian citizen with a Canadian passport, began working in the United States as a computer systems analyst on January 1, 2001, but with his employment being terminated in October 2001 at which point he returned to Canada. His wife remained at their jointly owned house in Mississauga throughout the period.

He was found to have remained an ordinary resident of Canada.

Gaudreau v. The Queen, 2005 DTC 66, 2004 TCC 840, aff'd 2005 DTC 5702, 2005 FCA 388

The taxpayer, who left with his wife to work in Egypt for 48 months, while maintaining various ties including their home in Ontario while in Egypt, was found to be ordinarily resident in Canada during that period given that his "ties were all with Canada, save only those ties, undertaken during the term of his absence, which were necessary to permit him and his wife to enjoy an acceptable and expected lifestyle while in Egypt" (pp. 72-73).

Snow v. The Queen, 2004 DTC 2784, 2004 TCC 381 (Informal Procedure)

After the taxpayer took an assignment (initially scheduled for two years) to work in Belize she maintained her home in Vancouver where her son and family resided, maintained her banking and financial interests in Canada, visited her connections in Vancouver approximately once per year, had no intention to reside on any permanent basis in Belize and considered Vancouver as a place where she could reconnect if need be. She had not ceased to be in resident in Canada.

Revah v. The Queen, 2004 DTC 2735, 2004 TCC 312

The taxpayer, who had moved with his wife to Florida in September 1992, had thereupon ceased to be a resident of Canada notwithstanding that he retained a number of minor ties with Canada including maintaining two bank accounts there for the purpose of processing pension payments, visits to Canadian family members and the holding of some Canadian assets on behalf of his son. Rip J. stated (at p. 2737) that "the fact that he reported only his United States income in his United States income tax return is a matter for the Internal Revenue Service and not for me or the Canadian Revenue Agency".

Nicholson v. The Queen, 2004 DTC 2013, 2003 TCC 862

When the taxpayer moved from Canada to the United Kingdom following a promotion, the settled nature of his life was now there, notwithstanding that he retained some ties with Canada relating to the continued presence there of his two children and separated wife, although not of his girlfriend. His return to Canada 21 months later was due to an unexpected acquisition of control of his employer. He was not a resident of Canada during the 21 month period.

Allchin v. The Queen, 2003 DTC 935 (TCC)

The taxpayer, a registered nurse who previously had been a resident of Canada and who was employed in the taxation years in question in the U.S., was found to continue to be a resident of Canada in those years given the connections that she has maintained with Canada (including maintaining her Ontario driver's licence, OHIP coverage, the utilization of the services of a Windsor doctor and dentist, membership in a yacht club and her ties with her husband and two children in the Windsor family home including the provision of support to the children) and the temporary nature of her connections to the U.S. including not entering into a lease or purchasing a home and instead sharing room with a relative or friend.

Kadrie v. The Queen, 2001 DTC 967 (TCC)

The taxpayer was not ordinarily resident in Canada in the taxation years in question given that his family was in Canada only because his wife was prohibited (as a result of a law passed by the Kuwaiti authorities following the Gulf war that Jordanian residents were not permitted to return to the country) from returning to Kuwait, his visits to Canada were brief, he owned no home in Canada, his economic focus was in Kuwait and he expected that he would ultimately be successful in obtaining a special dispensation to permit his wife to return to Kuwait.

Bell v. Canada, 2000 DTC 6365, 2008 FCA 51 (FCA)

The central management and control of a company, for purposes of assessing the degree of connection of employment income and dividends generated for native employees and a native shareholder, was found not to be situate on the reserve, notwithstanding the maintenance of a small office there, given that the shareholder and officer managed the company from wherever he was with the assistance of his accountant, who was situate off the reserve.

Shih v. The Queen, 2000 DTC 2072 (TCC)

The taxpayer, who was a pharmacist permanently employed in Taiwan, was found not to have become a resident of Canada notwithstanding that he had entered Canada and applied for permanent residence under the entrepreneurship program and had bought a house in Regina at which his wife and children resided. The taxpayer did not change his life pattern with respect to his continuous employment and social connections in Taiwan (including caring for his parents there and spending over ¾ of his time there); and Mogan TCJ accepted the taxpayer's explanation that the Regina connection had been established in order to have his children educated in North America.

Boston v. The Queen, 98 DTC 1124, [1998] 1 CTC 2217 (TCC)

The taxpayer, who was transferred by Exxon from Canada to Malaysia in 1988, and served (and lived in a rented house) there until his retirement in 1995, was found to be resident in Malaysia rather than Canada in his 1989 to 1992 taxation years. Other than two 14-day visits to Edmonton, where his wife continued to stay, he spent the whole time in Malaysia. His wife (with whom he had strained relations) made eight different trips to Malaysia in the years in question. More than half of his salary was deposited on a monthly basis into a bank account he maintained in Canada. However, he took all the steps that one would expect of a person moving to the other side of the world for three years (the minimum length of his posting).

Endres v. The Queen, 98 DTC 1101, [1998] 1 CTC 2259 (TCC)

In the summer of 1985, the taxpayer started spending significant time at Elizabeth City in North Carolina in order to manage one of his businesses there, and in October he and his wife bought a house there. They retained their house in Nova Scotia, and spent their summers there during which he was engaged in the affairs of his Canadian businesses. They did not sell their Canadian investments, they kept their Canadian bank accounts and credit cards, did not change their Nova Scotia address for various purposes, and retained their membership in the Nova Scotia medical plan. The taxpayer and his wife were found to be resident in the United States in their 1988 and 1989 years given their permanent home was in Elizabeth City whereas their house in Nova Scotia was leased for the major part of the year, and given that their children were educated in North Carolina and their social and household life was centered on Elizabeth City.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 4 145

Fisher v. The Queen, 95 DTC 841 (TCC)

The taxpayer, who was actively involved in selling European art to Japanese clients and spent much of his time travelling between Europe and Japan, was found to be ordinarily resident in Canada in 1987 and 1988 in light inter alia of the following factors: he had strong family ties to Canada; he had an apartment and other personal-use real estate in Canada; he returned to Canada frequently and regularly, and had a right to come to Canada whenever he chose; and it (unlike Japan) was a country whose language he spoke and of which he was a citizen by birth.

Wassick v. MNR, 95 DTC 19, [1994] 2 CTC 2235 (TCC)

The taxpayer, who worked abroad (primarily in Scotland) as a deep-sea diver but who frequently returned to Canada where he had friends and relatives and a relationship that ultimately culminated in a common-law union, was found to be ordinarily resident in Canada.

Re Koo, [1993] 1 F.C. 286, 1992 CanLII 2417 (T.D.)

In finding that the appellant, who was physically present in Canada for 232 days during the four-year period preceding his application for citizenship, did not fulfil the requirement in s. 5(1) of the Citizenship Act of having accumulated "at least three years of residence in Canada" in that four-year period, Reed J. stated (p. 300):

"Some of the appellant's extended family is here, but it is not possible to say that Canada is the main focus of the appellant's family life. The pattern of physical presences in Canada is more consistent with visits to this country rather than demonstrating a return to a place where one regularly, normally and customarily lives."

Padmore v. IRC, [1989] BTC 221 (C.A.)

The taxpayer, who was resident in the U.K., was one of over 100 U.K. resident individuals (primarily members of firms of patent agents) who were partners in a firm which carried on a business of providing a world-wide renewals service for patents, trade marks etc. The day to day business of the partnership was carried on by two managing partners who were resident in Jersey, and general meetings of the partnership were held in Jersey only.

After finding that the partnership was a "body of persons" for purposes of the relevant provisions, the Court went on to find that the partnership was resident in Jersey for purposes of the U.K./Jersey double taxation arrangement. "[T]he correct test of residence for a partnership is the location of management and control."

Dawson v. C.I.R., [1989] BTC 200, [1989] UKHL TC_62_301 (HL)

A trust, of which two of the three trustees were non-residents of the United Kingdom, was held not to be subject to tax under s. 108 of the Income and Corporation Taxes Act 1970, which levied tax "in respect of (a) the annual profits or gains arising or accruing - (i) to any person residing in the United Kingdom from any kind of property whatever".

"In the situation which prevails here, namely that one of the trustees is resident in the U.K. but the other two are resident abroad, the income likewise arises or accrues to all three, but all three cannot be jointly assessed to tax. There can be no justification for assessing to tax the respondent above, on the ground he is resident in the U.K., because the income does not arise or accrue to him personally. He has no right of control over the income."

Reed v. Clark, [1985] BTC 224 (HC)

An English musician, who was advised to protract his intended visit to the U.S.A. to cover an entire fiscal year in order to avoid U.K. tax, and who accordingly departed for the U.S.A. on April 3, 1978 and did not return until May 2, 1979, was held not to be "a person residing in the U.K." for his 1978-1979 fiscal year.

Levene v. IRC, [1928] AC 217, [1928] All ER 746

Relying on the Oxford Dictionary's definition of "reside," Lord Chancellor Cave found that the taxpayer's place of residence is the place of the taxpayer's "settled or usual abode." In order to terminate residence in the U.K., the taxpayer must undergo a "distinct break" such that the taxpayer's settled or usual abode is no longer in the United Kingdom (para. 14).

The taxpayer was found to be resident in the U.K., as he spent five months each summer in the U.K., where he received medical attention and engaged in religious and social pursuits.

De Beers Consolidated Mines Limited v Howe, [1906] AC 455

Lord Loreburn LC stated at 458:

In applying the conception of residence to a company, we ought, I think, to proceed as nearly as we can upon the analogy of an individual. A company cannot eat or sleep, but it can keep house and do business. We ought, therefore, to see where it really keeps house and does business. An individual may be of foreign nationality, and yet reside in the United Kingdom. So may a company. Otherwise it might have its chief seat of management and its centre of trading in England under the protection of English law, and yet escape the appropriate taxation by the simple expedient of being registered abroad and distributing its dividends abroad. The decision of Kelly C.B. and Huddleston B. in the Calcutta Jute Mills v Nicholson and the Cesena Sulphur Co. v Nicholson [cases]…involved the principle that a company resides for purposes of income tax where its real business is carried on…I regard that as the true rule, and the real business is carried on where the central management and control actually abides.

It remains to be considered whether the present case falls within that rule. This is a pure question of fact to be determined, not according to the construction of this or that regulation or bye-law, but on a scrutiny of the course of business and trading.

Administrative Policy

17 May 2022 IFA Roundtable Q. 10, 2022-0926331C6 - Corporate Residence Approach

board meeting situs not determinative of CMC

Regarding a query as to whether CRA will continue to have “too much focus on the location of board meetings” in determining corporate residency, CRA noted that De Beers indicated that a corporation’s central management and control “must … be determined after a scrutiny of the whole ‘course of business and trading’ of the corporation,” and then stated:

Usually, central management and control is considered to abide where the members of the board of directors meet to make important and strategic decisions regarding the affairs of the corporation, unless central management of control is actually exercised elsewhere. However, the presence of board meetings in the country in which the corporation is asserting residence would not, in and of itself, be sufficient to conclude that the corporation is resident in that country. It is well-established under common law that it is the actual place of management, not the place in which it ought to be managed, which fixes the residence of a corporation. The courts have repeatedly considered evidence beyond the location of board meetings in order to look at the whole “course of business and trading” of a corporation.

17 May 2022 IFA Roundtable Q. 1, 2022-0933371C6 - Meaning of Habitual Abode

CRA residence test of “significant, secondary or other ties”

Before responding to a question as to how it applied the test of an in individual’s “habitual mode” under the “tie breaker” rules in most treaties, CRA indicated that the leading case on an individual’s residence was Thomson, which stated that it is a matter of “the degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question.” CRA noted that it often phrased that determination in terms of “significant, secondary or other ties.”

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 4 habitual abode determined in context based inter alia on relative stays and nature of activities 137

Guidance on international income tax issues raised by the COVID-19 crisis, CRA Webpage 31 March 2021

CRA referred to the travel restrictions imposed by governments or businesses in response to the COVID-19 crisis as a safety measure for their citizens or employees (the “Travel Restrictions”) and to the administrative response of CRA (being a concession rather than an interpretive approach) which will apply from March 16 until August 31, 2020, unless extended.

Days in Canada solely because of COVID-19 Travel Restrictions not counted towards individual’s residency

Where [an individual visiting Canada] has remained in Canada solely because of the Travel Restrictions, that factor alone will not cause the Agency to consider the common-law factual test of residency to be met. In addition …the Agency will not consider the days during which an individual is present in Canada and is unable to return to their country of residence solely as a result of the Travel Restrictions to count towards the 183-day limit for deemed residency. This will be the Agency position where, among other things, the individual is usually a resident of another country and intends to return, and does in fact return, to his or her country of residence as soon as he or she is able to do so.

Participation in board meetings from Canada due to Travel Restrictions does not render the corporation or trust resident in Canada

[W]here a director of a corporation must participate in a board meeting from Canada because of the Travel Restrictions, the Agency will not consider the corporation to become resident in Canada solely for that reason. …

[W]here appropriate, the Agency will consider adopting a similar approach in determining the residency of a commercial trust.

VII. Supplemental guidance

A. Extension re individual residency

  • For the initial relief period (March 16 until September 30, 2020), the guidance provides that the CRA will not consider the common-law factual test of residency to be met if an individual stayed in Canada only because of COVID travel restrictions, and the days of physical presence will not count towards the s. 250(1)(a) sojourning rule of deemed residency. This specific relief for individuals is extended until the earlier of the date of the lifting of the travel restrictions and December 31, 2021. This extension does not apply to corporate residency.

3 February 2021 Transfer Pricing Webinar of the Canadian Tax Foundation: Panel I: Transfer Pricing Audits and Competent Authority

COVID residency relief has not been extended

  • CRA’s COVID-related guidance on corporate residency, permanent establishments, and other similar considerations expired on September 30, 2020, and it has decided not to extend the corporate residency guidance beyond that date, mostly because residency determinations need to be addressed on a case-by-case basis, especially if businesses start adopting new ways of doing business after the pandemic crisis is over.

28 September 2020 External T.I. 2019-0800551E5 - Provincial Residency of a TFSA Trust

central management and control of a TFSA trust is generally exercised in the office of the investment firm to which most of the trustee’s functions have been delegated

The Alberta-resident holder of a TFSA is responsible for making investment decisions and determining contributions and withdrawals, and its trustee is a trust company with its head office in Ontario that has entered into an agency agreement with an investment firm to which it has delegated responsibility for the day-to-day administration of the TFSA trust, including asset custody, trade execution, handling payments and record keeping and tax filings. The TFSA trust and holder are served by the agent’s Alberta branch. Where does the TFSA trust reside, and in which provinces is it liable for tax on a securities trading business or a non-qualified investment?

CRA responded:

The Act imposes significant duties and obligations on TFSA trustees, which require the trustee to maintain and exercise key decision-making powers and responsibilities over the trust. …

In light of these statutory duties and obligations, it is our view that the central management and control of a TFSA trust rests with and is exercised by the TFSA trustee and that the TFSA trust is considered to reside in the province where the TFSA trustee factually exercises that function. …

In a situation where the level of involvement of an agent in the administration of a TFSA trust is such that the trustee would be considered to exercise the central management and control of the trust through the agent at the location of the agent’s place of business that serves the TFSA trust and holder, the TFSA trust would be considered to reside in the province in which that place of business is located … [W]e would expect this to be the case in common arrangements involving registered plans where the administrative and investment functions of the plan are largely delegated by the plan trustee to a Canadian-regulated investment firm under an agency agreement.

These comments also generally applied to RRSP, RRIF, RESP and RDSP trusts.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 2600 - Subsection 2600(2) office of investment manager of TFSA treated as a PE of the TFSA 343
Tax Topics - Income Tax Regulations - Regulation 2601 - Subsection 2601(2) office of investment manager was PE to which securities trading income of TFSA was allocated 202

2020 IFA-YIN Seminar on COVID-19 Guidelines, Q.9

in the COVID context, companies without Treaty protection should demonstrate that board meeting locations were not manipulative

The Guidance on international income tax issues raised by the COVID-19 crisis indicates that CRA will consider administrative relief for non-resident entities which are resident in countries with which Canada has not entered into an income tax treaty “on a case-by-case basis”. What are the relevant considerations?

After indicating that it avoids bright-line tests in order to avoid accommodating tax avoidance techniques, CRA indicated that, broadly speaking, taxpayers should be prepared to illustrate how the location and timing of the board meetings were necessary from a business corporate governance perspective and not intended to exploit the relief in the Guidance for tax avoidance purposes.

2020 IFA-YIN Seminar on COVID-19 Guidelines, Q.1 and Q.2

meaning of a “travel restriction under COVID Guidelines

In the context CRA's Guidance on international income tax issues raised by the COVID-19 crisis would recommendations without legal restrictions qualify (e.g., the recommendation of the Canadian government that every Canadian return home) or a mandatory quarantine period (imposed by the Canadian government or a foreign government) be considered a “Travel Restriction”? CRA responded that a mandatory quarantine period is a travel restriction, a recommendation that does not have legal force may qualify as a “travel restriction” depending on the surrounding facts and circumstances, and that a government recommendation to return to Canada would generally be viewed as a “travel restriction.”

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 11, 2019-0812971C6 F

CRA uses information collected on an NR73 as its principal tool in assessing individuals’ residency

Some pension plans provide that after two years of non-residence of the annuitant, the funds in a locked-in retirement account, locked-in RRSP or life income funds cease to be locked-in and can be withdrawn without limitation through a transfer to a non-locked-in retirement vehicle such as an RRSP or RRIF. When asked to confirm non-residence status in this context, CRA will not simplify its normal procedures for reviewing residency. It stated:

[T]he CRA must conduct a detailed review of all facts and circumstances specific to the individual's situation, which will generally have been brought to its attention by Form NR73. These include residency links with Canada and the duration, purpose, intent and continuity of Canadian and international travel.

Neal Armstrong. Summaries of 11 October 2019 APFF Financial Strategies and Instruments Roundtable, Q.11 under s. 2(1).

7 October 2011 Roundtable, 2011-0412221C6 F - Résidence fiducie - Cause St. Michael (Garron)

determination of the provincial residence of trust

What mechanism is followed for determining the residence of a trust if two Canadian provinces are each of the opinion that the central management and control of the trust is in their territory, e.g., where CRA is responsible for the tax administration of one of the provinces concerned? CRA responded:

There is no specific mechanism for determining the question of the residence of a trust in an interprovincial context. For the purpose of the operation of the Canadian self-assessment tax system, that is a question of fact, and not one specific to trusts. It is likely to occur with respect to any Canadian taxpayer. That question is thus generally capable of being examined and discussed between the tax administrations and the taxpayer during an audit of the taxpayer. Furthermore, an assessment issued on a position adopted by a Canadian tax authority with respect to a taxpayer's place of residence may be challenged by the taxpayer in the course of a duly filed objection in accordance with the requirements of the applicable legislation.

22 March 2018 Internal T.I. 2018-0738201I7 - Residency of TFSA trust

all self-directed RRSPs and TFSAs are resident in Canada

A non-resident holder of a self-directed TFSA trust argued that as she made all the investment decisions, the trust was not resident in Canada. The Directorate noted that (as required by s. (b)(i) of the definition of qualifying arrangement in s. 146.2(1)) the trustee was a Canadian trust company, noted that the trustee was required under the Act “to maintain and exercise key decision-making powers and responsibilities over the trust” (e.g., ensuring compliance with ITA requirements including monitoring for non-qualified investments and ensuring all transactions occurred at fair market value), and stated:

In light of these statutory duties and obligations, the central management and control of a TFSA trust will rest with, and be exercised by, the trustee in Canada … [so that] a TFSA trust will always be considered resident in Canada for the purposes of the Act.

The Directorate similarly stated that RRSPs, RRIFs, RESPS and RDSPs “will always be considered resident in Canada.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 146.2 - Subsection 146.2(6) investment trading decisions by non-resident holder did not make the TFSA trust a non-resident 108

18 October 2016 External T.I. 2015-0608051E5 F - Emigration of a trust

Fundy Settlement test may differ from residence of trustees

CRA confirmed that s. 220(4.5) applies to a trust which has ceased to be resident in Canada. Before so concluding, it stated:

Recall that the highest court in the land in Fundy Settlement, 2012 SCC 14 confirmed that the place of residence of a trust under Canadian tax law is the place where the central management and control of the trust is actually exercised. This place may therefore differ from the place where the trustee(s) resides.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(4.5) emigrating trust can elect to defer payment of the exit tax 199

24 November 2015 CTF Annual Roundtable, Q.3

Discovery Trust and Boettger have not changed CRA’s application of the Fundy residency test to provincial residency

CRA's views regarding the application of the "central management and control" test in determining the residency of a trust for provincial tax purpose (so as to determine whether such control is exercised by the settlor or beneficiaries rather than the named trustee) has not changed as a result of Discovery Trust and Boettger, so that it will continue to look at who makes the substantive decisions (being the high-level, strategic decision-making and governance rather than the day-to-day functions), where the power and discretion is really being exercised, and where the real business is carried on.

26 January 2015 External T.I. 2014-0547501E5 - Certificates of residency and partnerships

certification of Canadian partnership at request of authorized representative

After noting its earlier position at 3 December 2013 TEI Roundtable Q. 9, 2013-0510851C6 that a certificate of residency was not available for a partnership, CRA wrote stating that it was advising of "a change in the certificate of residency process," and stated:

[A[ representative authorized to act…can make a request on behalf of the partners. In such a case, the CRA will certify the residency of all the partners of the partnership, and certify that the partnership is a "Canadian partnership"… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 102 - Subsection 102(1) certification of Canadian partnership at request of authorized representative 91

15 December 2014 Internal T.I. 2012-0445361I7 F - Remboursement de frais de déménagement

criteria for determining “ordinarily resides” under s. 62 (coterminous with “ordinarily resident” under s. 250(3))

Before indicating that the question of whether the reimbursement of expenses of selling a residence at Location 1 in Canada, which had continued to be held by an employee after his relocation to a job abroad at Location 2, could be treated as a taxable benefit if such residence was sold at the time the employee was relocated again to another location and position abroad at Location 3, turned on whether he should be considered to ordinarily reside at Location 2, CRA indicated that the terms "ordinarily reside" and "ordinarily resident" have the same meaning and that “the notion of ‘ordinarily reside’ relates more to everyday life than to the permanent nature of the situation,” and then listed the following indicators as to whether a taxpayer "ordinarily resides" at a particular new location:

• the relocation of the taxpayer and the members of his or her household with their belongings, furniture and other items in their household to the new location.
• the availability of the former residence, that is to say if it was sold, rented, or if it has been advertised for sale or rent (if the taxpayer is the owner ), or if the lease was terminated (if the taxpayer is the lessee).
• the chosen residence at the new location accords with the ordinary lifestyle and needs of the taxpayer (for example, if the taxpayer would be able to live in the new residence for an indefinite period or if instead it is a hotel room or a room in a friend’s home).
• the transfer of banking services of the taxpayer and the taxpayer's other financial arrangements (including insurance policies) from the old to the new location.
• changing the taxpayer’s driver’s licence and registration certificates for non-commercial vehicles (to satisfy the requirements of the new location or to report the new residence address).
• a change in health care coverage to the new location.
• the transfer of certain services from the old to the new location (e.g., subscriptions to newspapers or magazines, cable, internet, and telephone services).
• the transfer of social relationships and other interests, from the old to the new location (such as participation in recreational, social, political or religious activities, and membership in personal or professional organizations).

Words and Phrases
ordinarily reside
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) reimbursement of moving expenses not a taxable benefit if such moving expenses otherwise deductible under s. 62 which, in the case of multiple moves, can turn on whether there is ordinary residence at each location 436
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Eligible Relocation expenses re selling a Canadian home after a 2nd relocation abroad are non-deductible if no ordinary residence at 1st location abroad 263

S6-F1-C1 - Residence of a Trust or Estate

1.2 ...Fundy Settlement…clarified that residence of a trust will be determined by … where its real business is carried on, which is where the central management and control of the trust actually takes place. … [and] affirmed the view that the residence of the trustee does not always determine the residence of a trust.

1.4 It is not uncommon for more than one trustee to be involved in exercising the central management and control over a trust. The trust will reside in the jurisdiction in which the more substantial central management and control actually takes place.

1.5 …[A] substantial portion of the central management and control of the trust [sometimes] rests with someone other than the trustee, such as the settlor or the beneficiaries of the trust. Regardless of any contrary provisions in the trust agreement, the actions of these other persons in respect of the trust must be considered.

1.6 …[R]elevant factor[s] … may include:

  • the factual role of a trustee and other persons with respect to the trust property, including any decision-making limitations imposed thereon, either directly or indirectly, by any beneficiary, settlor or other relevant person; and
  • the ability of a trustee and other persons to select and instruct trust advisors with respect to the overall management of the trust.

3 December 2013 TEI Roundtable, 2013-0510851C6 - 2013 TEI – Question 9: Tax residency certificates.

no residency certificates for partnerships

Would CRA be willing to issue Canadian tax residency certificates in the name of a Canadian partnership on the basis of the Canadian residency of all its partners? CRA responded:

[W]hile the requirements and obligations involved in carrying on business in a foreign jurisdiction may present challenges, a certificate of residency is not currently available to a partnership. ... [A] partnership is not considered resident in Canada.

11 July 2013 External T.I. 2013-0490591E5 F - Montant pour une personne à charge

sole fact of a non-resident having a conjugal relationship with a Canadian resident does not render him a resident

A Taxpayer living in France (initially described as non-resident) frequently sees another person (the "Other Person") who lives the year half and half in Quebec and France, but they have never lived together in the same home for more than six consecutive months. They signed a Solidarity Pact but are not spouses. Would the Taxpayer be considered a resident of Canada given his close ties? CRA responded:

To determine residency status, a person's residential ties to Canada are important factors. Residential ties in Canada include, but are not limited to, a common-law partner or dependents in Canada, a home in Canada, personal property in Canada, such as a car or furniture, social ties in Canada, and economic ties to Canada. Other links as well as residential links that a person created or maintained in another country may also be relevant. …[T]he sole fact of the non-resident taxpayer being in a conjugal relationship with the Other Person would not make him a resident of Canada … .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118 - Subsection 118(1) - Paragraph 118(1)(b) - Subparagraph 118(1)(b)(ii) conditions not satisfied where children did not live with non-supporting husband following separation 142
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Common-Law Partner can be in a conjugal relationship even if live in the same home for only half of each year 148

Certificate of residency

An individual, a corporation, a trust, a non-profit organization, or a charity can get a certificate of residency, as long as they are resident in Canada.

The CRA cannot certify the residency of a partnership because partnerships are not considered resident; however, the individual partners of a partnership can ask for a certificate.

Notarizing and authenticating documents

...Some countries want the certificates of residency issued by the CRA to be authenticated or have apostille certification. The CRA cannot authenticate documents or provide apostille certifications. The information that follows is for taxpayers who need those procedures:

  • Authentication: The document needs to be notarized by a Canadian notary and authenticated by the Department of Foreign Affairs and International Trade. See Authentication of documents for more information.
  • Apostille certification: The document needs to be notarized by a Canadian notary, authenticated by the Department of Foreign Affairs and International Trade, and legalized by the particular country's embassy in Canada. For addresses to foreign embassies in Canada, see Diplomatic Missions' Addresses.

17 October 2012 External T.I. 2012-0437691E5 - Factual Resident - Missionary

missionary electing to be resident

As stated in Pamphlet T4131 Canadian Residents Abroad, where an individual is a missionary in another country and meets certain requirements, the individual can choose to be considered a factual resident even if they do not keep residential ties in Canada. To make this choice, the individual must satisfy all of the following requirements:

  • be a Canadian citizen or a permanent resident of Canada;
  • be in the service of a religious organization that has its national ministry office in Canada;
  • be sent out of Canada for five years or less; and
  • file an income tax and benefit return and report all income you receive from sources inside and outside Canada for each year you are absent from Canada.

5 October 2012 Roundtable, 2012-0451271C6 F - Residence of a trust

trust residency determination focuses on where in fact there is the exercise of authority over significant decisions

Following Fundy Settlement, what weight should be assigned to the following criteria in determining the residence of a trust that holds portfolio investments?

1- The location of the brokerage account
2- The location of the portfolio manager
3- The fact that the management is or is not discretionary
4- The place where the securities are held
5- The location of trustees’ meetings and decision making

After noting that Fundy Settlement found “that it is justified to apply the central management and control test in determining the residence of a trust, just as it is applied in determining the residence of a corporation,” CRA stated:

[I]t does not seem appropriate to define and comment on any specific factors that may be relevant for the purpose of determining whether there in fact is an exercising of authority over significant decisions of a trust. This approach appears to us to be further justified by the fact that the determination of the place of residence of a trust, although generally made at one time, may require that factors and factual elements relating to an extended period be considered. … [T]he fact that a person advises a trustee should not in itself generally alter the location of central management and control of the trust at the trustee level.

S5-F1-C1 - Determining an Individual’s Residence Status

1.10 The most important factor to be considered in determining whether an individual leaving Canada remains resident in Canada for tax purposes is whether the individual maintains residential ties with Canada while abroad….

1.12 Where an individual who leaves Canada keeps a dwelling place in Canada (whether owned or leased), available for his or her occupation, that dwelling place will be considered to be a significant residential tie with Canada during the individual's stay abroad. However, if an individual leases a dwelling place located in Canada to a third party on arm's-length terms…[CRA] may consider the dwelling place not to be a significant residential tie with Canada….

1.13 If an individual who is married or cohabiting with a common-law partner leaves Canada, but his or her spouse or common-law partner remains in Canada, then that spouse or common-law partner will usually be a significant residential tie with Canada during the individual's absence from Canada….

1.17 Whether an individual intended to permanently sever residential ties with Canada at the time of his or her departure from Canada is a question of fact to be determined with regard to all of the circumstances of each case.... Generally, if there is evidence that an individual's return to Canada was foreseen at the time of his or her departure, the CRA will attach more significance to the individual's remaining residential ties with Canada….[f]or example, where, at the time of an individual's departure from Canada, there exists a contract for employment in Canada….

1.20 Where an individual leaves Canada and permanently severs all of his or her residential ties with Canada, the individual's residence status...will not be affected by occasional return visits to Canada... .

1.56 Where certainty is required in respect of the tax consequences of the proposed departure from or arrival in Canada of a particular individual taxpayer, the Income Tax Rulings Directorate may, in appropriate circumstances, be prepared to issue a binding advance income tax ruling with respect to the residency status of that taxpayer.

30 October 2012 Ontario CTF Roundtable Q. 8, 2012-0462841C6 - Ontario CTF – Q8 Residency of a Trust

trust residence following Fundy

In response to a query on the Fundy Settlement case, CRA stated:

Normally, residence of a trust is dependent upon residence of the trustee or trustees who can exercise management and control of the trust. In some situations, the facts may indicate that a substantial portion of the management and control rests with some other person such as the settlor or the beneficiaries. In these situations, the residence of this other person may be considered to be the determining factor for the trust, regardless of any contrary provisions in the trust agreement.

4 January 2013 External T.I. 2012-0448681E5 - s. 116 req. of NR-estates per draft NRT legis.

CRA, when asked whether a s. 116 certificate was required when an estate with American resident executors disposed of taxable Canadian property to Canadian resident beneficiaries where the testator was an American (or, alternatively, a Canadian) resident, first commented on the residence of the estate under general principles, by referring to the Fundy Settlement case, and stating:

The SCC's decision indicated that it is the central management and control over the trust, rather than the residence of the trustees that is the appropriate test for determining trust residence....Therefore in order to address your concerns we will assume in the hypothetical scenario presented that the central management and control over the estate rests with the executors who are residents of the United States of America and therefore the estate is not resident in Canada.

25 June 2012 External T.I. 2012-0446361E5 - Determination of residency Status

A residency determination for an individual should be obtained by sending a completed NR73 to the International Tax Services Office, 2204 Walkley Road, Ottawa, ON, K1A 1A8.

8 December 2011 External T.I. 2011-0427451E5 F - Statut de résidence fiscale

Rulings Directorate does not determine residency

The taxpayer who had already left Canada wished the Rulings Directorate to intervene to determine her tax residence status. The Directorate noted that the taxpayer was already in discussions with the International Tax Services Office to which she had submitted a NR73 request for determination. Furthermore, it was not the Directorate’s mandate to determine taxpayers' tax residence status.

8 June 2010 STEP National Roundtable Q. 15, 2010-0363111C6 - Residency of a Trust

In response to a question respecting the scope of the Garron case, CRA stated that it continues to be its view that the residence of a trust or estate is a question of fact.

20 April 2010 External T.I. 2010-0355071E5 F - Ligne directrice 4

central management and control of Indian organization is at the main office if control is legitimately exercised at meetings conducted there

In discussing whether an organization had its central management and control on a reserve, CRA stated:

The term "employer is resident on a reserve", as used in the Guidelines, means that the reserve is the place where the central management and control of the employer's organization is located. Management and control of an organization is generally considered to be exercised by the group that performs the functions of a board of directors of the organization.

However, the actual management and control of an organization may be exercised by another person or group. Generally, management and control is exercised at the principal place of business, but it is recognized that this function may be legitimately exercised in a location other than the main administrative office of the organization. Where an organization, which would not otherwise be considered as resident on the reservation, claims that it meets the definition because it holds its board meetings on the reservation, it should generally be considered to meet the definition where the management and control of the organization is legitimately exercised during those meetings. A conclusive resolution of this question of fact requires a review of all the facts surrounding a situation, including the minutes of the board meetings and the resolutions or by-laws passed at those meetings.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 Indian organization did not qualify under Guideline 4 where 20% of clientele lived off reserve 83

18 September 2008 External T.I. 2008-0264381E5 F - Résidence d'une fiducie

holding of assets by Canadian securities depositary and custodian would not be relevant to trust residence

Non-resident individuals entrusted the custody of certain funds to the Quebec office of a Canadian financial institution, which held the funds in the form of corporate securities and precious metals certificates, which were entrusted to it for safekeeping purposes. Now 10 of those individuals have died, and their heirs are non-residents. Are such securities held on their behalf held under trusts and, if so, is the trusts’ residence in Canada?

CRA indicated that given that the Canadian financial institution performs only custodial and safekeeping functions, there is no trust. After quoting the definition of legal representative, it stated:

A review of the will or the legislation governing the deceased's property would make it possible to determine the name and residence of the legal representatives having control of the estate's property, who are generally the executors or liquidators. Paragraph 2 of Interpretation Bulletin IT-447 will make it possible to establish which among these, if there are several, is the person who is administering the estate or has control of the estate's property as well as the residence of the estate. For this purpose, the CRA will not take into account the depositary and custodial functions performed by a Canadian financial institution that would not otherwise be a legal representative with control of the estate's property.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) securities depositary and custodian did not hold assets under a trust 133

2004 Ruling 2004-0099651R3 - Migration to Canada / PUC Reduction

Opinion that a non-resident corporation would become resident in Canada upon replacing its board with a new board a majority of whom resided in Canada and which conducted meetings in Canada.

2004 Ruling 2004-0099651R3 - Migration to Canada / PUC Reduction

Opinion that a non-resident corporation would become resident in Canada upon replacing its board with a new board a majority of whom resided in Canada and which conducted meetings in Canada.

4 June 2003 Internal T.I. 2003-0006967 F - Province de résidence d'une fiducie

Thibodeau applied to find that trust with Quebec trustee therefore was resident in Quebec
Also released under document number 2003-00069670.

Regarding a plan implemented by a trust purportedly resident in Quebec to avoid paying provincial tax by making the election under s. 104(13.1) to be deemed to retain its income (notwithstanding its actual distribution) so that it could claim the Quebec abatement but without the equivalent election being made under the QTA so that such income was not subject to Quebec tax (planning that had since been cut off by an amendment to section 663.1 of the QTA, the Directorate indicated that, in light of Thibodeau, it was sufficient that the trustee was resident in Quebec, notwithstanding the substantial role of the non-Quebec settlor, stating that “this case appears to establish the primacy of the residence of the trustees as the determining factor in the residence of a trust. Indeed, the Court appears to attach no importance to the facts showing that one of the three trustees appeared to be the directing mind of the trust.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 120 - Subsection 120(2) Quebec abatement available even where no Quebec tax was payable on the income (due to abuse of s. 104(13.1) election) 145
Tax Topics - Income Tax Act - Section 245 - Subsection 245(1) - Tax Benefit scheme generating Quebec abatement without payment of any Quebec tax did not result in a “tax benefit” 146
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) s. 75(2)(a)(i) inapplicable re settlor being beneficiary of trust beneficiary’s estate/ s. 75(2)(b) inapplicable re power of settlor to replace trustees 303

19 June 1994 Internal T.I. 9413156 - CANADIAN RESIDENT STATUS OF U.S. VISA HOLDERS (7576-1)

RC is in agreement that it may be possible for an individual to sever his residential ties with Canada and not become a resident of the United States for U.S. tax purposes. All the facts must be reviewed to determine the purpose, and the degree of permanence, of the move to the U.S.

19 June 1992 Hong Kong Seminar, Q. A.1-A.3 (May 1993 Access Letter, p. 225)

An individual is resident in Canada if that is where the individual, in a settled routine of life, regularly, normally or customarily lives.

Tax Professionals Mini Round Table - Vancouver - Q. 16 (March 1993 Access Letter, p. 105)

RC recognizes that an individual who is resident both in Canada and the U.S. under the Income Tax Act and the Internal Revenue Code but who is a resident of the U.S. for treaty purposes will therefore not be considered to be resident in Canada.

8 July 1992 T.I. 9210362 (January - February 1993 Access Letter, p. 5, ¶C2-017)

Discussion of whether an individual becomes resident at the time when he establishes permanent residence for immigration purposes.

27 September 1991 Memorandum (Tax Window, No. 10, p. 15, ¶1489)

Discussion of factors bearing on whether an individual who has left Canada for more than two years continues to be a resident.

September 1991 Memorandum (Tax Window, No. 9, p. 23, ¶1457)

A trust generally will be considered to reside on an Indian reserve if the trustee or the majority of the trustees who manage or control the trust's assets reside on the reserve.

IT-447 "Residence of a Trust or Estate

IT-221R2 "Determination of an Individual's Residence Status"

Certificate of residency "CRA cannot certify the residency of a partnership because partnerships are not considered resident; however, the individual partners of a partnership can ask for a certificate."


Brian Kearl, Carl Deeprose, "Leaving Canada's New High Tax Rate Regime: Considerations, Tips and Traps", 2016 Conference Report (Canadian Tax Foundation),32:1-24

Significance of residential ties (p. 32:7)

[E]migrating Canadians should not leave an available residence behind, and should emigrate with their spouse and dependents.

Joel A. Nitikman, "Central Management and Control and the Rule in Esquire Nominees: Where are we after Hua Wang Bank Berhad?", International Tax Planning, Federated Press, Vol. XX, No. 1, 2015, p. 1368.

Residence test for SPV (p. 1371)

[A] corporate taxpayer, resident in one country, establishes a special purposes vehicle ("SPV") in another country as part of an overall tax plan developed and overseen by the tax advisors in the first country….[Is] the SPV is resident in its home country because that is where its Board meets and makes decisions, the taxpayer's home country...[?]

Esquire Nominees: directors received "advice" (p. 1371)

This question arose in Esquire Nominees Ltd. v. Commissioner of Taxation [fn: 22: (1972), 129 CLR 177 [[1973] HCA 67] (F.C.A.), aff'd without discussion of this point (1973), 129 CLR 177 (H.C.A.). ...Chief Justice Barwick at paragraph 6 of his Judgement stated that he "fully agreed" with the lower court's decision on the residence issue. Justice Menzies at paragraph 8...also agreed... .] One issue was whether Esquire, a Norfolk Island company acting as trustee of a trust, was resident in Australia, as the Australian Commissioner of Tax argued, rather than in Norfolk Island, as the company argued. The trust has been set up as a result of tax advice provided by an Australian firm of accountants for an Australian resident. Esquire had directors who lived on Norfolk Island. It was clear that the Norfolk Island directors did not take actions on their own initiative, but only at the instigation of the accountants. Nevertheless, the Trial Judge held that the company was resident in Norfolk Island and not in Australia.

Hua Wang Bank Berhd: allegation of control by accountant (p. 1373)

The most recent case...appears to be Hua Wang Bank Berhad [[2014] FCA 1392] [the subsequent Full Court decision is summarized above]

H. Michael Dolson, "Trust Residence After Garron: Provincial Considerations", Canadian Tax Journal, (2014) 62:3, 671-99.

Application of corporate central management and control test (pp. 694-5)

[O]nce the elements of control in respect of the trust property have been ascertained, it is the place from which that control is exercised that is relevant, and not the day-to-day location of the "controller." If it can be proved that control is exercised at a meeting in a particular jurisdiction, then, by analogy to a corporation and the making of decisions in the place where the board of directors meets, central management and control is situated in that particular jurisdiction. Again, this may require a more formal decision-making process…

See under Reg. 2601(1) for more detailed summary.

Kevyn Nightingale, "New Canadian Citizenship Rules (Bill C-24) and Tax", CCH Tax Topics, No. 2190, February 27, 2014, p. 1

Old citizenship rule (p.1)

As Citizenship and Immigration Canada ("CIC") says:

"According to the current Citizenship Act, applicants must have resided in Canada for three out of four years…yet "residence" is not defined. As a result, it has been possible for individuals who have spent little time in Canada to acquire citizenship."

New citizenship rule (p.1)

…Henceforth, an applicant [for Canadian citizenship] will have to be physically present for four years (1,460 days) in a six-year period and for at least 183 days per year in four of the six years. He or she would be required to file Canadian income tax returns, if required under the Income Tax Act. Now each applicant has an incentive to file Canadian tax returns. Without them, CIC will have to determine they were not required. As a practical matter, CIC will likely consult with the CRA to make this determination, so anyone applying for citizenship will need to have their tax affairs in order.

183-day sojourning rule in s. 250(1)(a) (p. 1)

[P]eople who "sojourn" in Canada for 183 days or more in a year [are deemed] to be residents; not everyone who is physically present for this time is "sojourning", but the power of this provision has recently been held to be broader than was originally thought; [f.n.3...Elliott...2013 DTC 1070 (TCC).]

P. Bourgeois, L. Blanchette, " The Internet, Electronic Commerce, and Taxes - Some Reflections, Part 2", 1997 Canadian Tax Journal, Vol. 45, No. 6, p. 1378.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 253 0

P. Bourgeois, L. Blanchette, " The Internet, Electronic Commerce, and Taxes - Some Reflections, Part 1", 1997 Canadian Tax Journal, Vol. 45, No. 5, p. 1127.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 253 0

Oliver, "Company Residence - Four Cases", 1996 British Tax Review, No. 5, p. 505: Discussion of the clockwork residence theory.

Bowman, "Sophisticated Estate-Planning Techniques: Cross-Border Dimensions", 1993 Conference Report, c. 38: Discussion (at pp.16-17) of whether a Canadian-resident "protector" may cause a trust established outside Canada to be considered to be resident in Canada; and of the weight to be given to the jurisdiction of the governing law of the trust in determining the residence question.

Monteith, "The Problem of Foreseeable Return", Taxation of Executive Compensation and Retirement, December/January 1994, p. 851.

Kroft, "Jurisdiction to Tax: An Update", 1993 Corporate Management Tax Conference Report, c. 1.

Sheridan, "The Residence of Companies for Taxation Purposes", British Tax Review, 1990, No. 3, p. 78: Review of the U.K. case law on residence.

Green, "The Residence of Trusts for Income Tax Purposes", 21 Canadian Tax Journal, May-June 1983, p. 217.

Wosner, "Ordinary Residence, the Law and Practice", 1983 British Tax Review, p. 347.

Subsection 2(3) - Tax payable by non-resident persons


Paragraph 2(3)(a)

See Also

Hewitt v. MNR, 89 DTC 451, [1989] 2 CTC 2278 (TCC)

The taxpayer left Canada to work in Libya for an oil company, and entered into a "thrift plan" offered by the oil company under which he agreed to have 10% of his salary contributed to the plan, and the company agreed to contribute an amount equal to 15%. Upon terminating his employ on an amicable basis, the taxpayer became entitled to the amounts in the plan (including accrued interest) which he directed be paid into his bank account in Sarnia. The Crown conceded he was a non-resident while in Libya.

The payment of these amounts was exempt from tax. "[T]hey were derived from a source which is exempt from income tax in Canada: the employment outside Canada of a person not resident in Canada."

Administrative Policy

IT-168R3 "Athletes and Players Employed by Football, Hockey and Similar Clubs" under "Non-Residents"

Paragraph 2(3)(b)


A non-resident of Canada who carries on business in Canada will be subject pursuant to s. 115(1)(a)(ii) to Part I tax on its income from carrying on that business. The question as to whether a non-resident is carrying on business in Canada turns on the mixed question of fact and law as to whether the connection, significance and level of its its activities in Canada are sufficient under the tests developed in the Anglo-Canadian jurisprudence to constitute carrying on a business in Canada. (Most of the British jurisprudence deals with the similar question of where a trade is exercised, rather than where a business is carried on. As noted in American Leaf Blending, the two concepts are somewhat different.) The related question as to how and to what extent income of a business should be computed and allocated to Canada is discussed under s. 115(1)(a)(ii).

The mere fact that a non-resident does business with Canadian customers or suppliers is not sufficient under the jurisprudence to constitute carrying on business in Canada, and this conclusion may not change if the non-resident has minor activities of an ancillary character that it carries on in Canada in support of its dealings with Canadian customers, such as having its Canadian contact distribute its brochures, or maintaining a bank account in Canada (Capitol Life). The Smidth case found that a Danish manufacturer was not exercising a trade in the UK notwithstanding some quite significant activities that it engaged in there, viz, maintaining a UK sales office (although contracts were concluded in Denmark) and supervising the installation of its equipment in the UK. Similarly, the soliciting of orders in the UK through an agent was not sufficient to result in a non-resident being considered to exercise its wine trade there (Grainger). However, s. 253 now provides that the soliciting by a non-resident of orders in Canada or offering anything for sale in Canada through an agent or employee will result in the non-resident being considered to carry on business in Canada in respect of that activity.

The Smidth case suggested that the key question in determining whether a trade is exercised in the UK is, "where do the operations take place from which the profits in substance arise?" (cf. London Life) Where the business in question is one of trading in property, the business generally will be considered to be carried on where the contracts are made (Geigy, Sudden Valley, Belfour v. Mace). A business of leasing equipment was found to be carried on in Canada where the equipment was leased in Canada to Canadian customers (GLS) . In keeping with the Smidth principle, the activity of buying and selling real estate, if sufficent to constitute the carrying on of a business, often will be considered to be carried on in Canada if the real estate was situate there (Loeck). A money-lending business was found to be carried on outside Canada where the basic administrative decisions were made in Switzerland (Pullman - see also Hafton).

In order for the non-resident to be considered to be carrying on business in Canada, the activity in question must constitute the carrying on of a business. The rental of real estate in Canada will constitute a business if the non-resident directly or through agents is relatively active in managing the rental property (Arbutus, Valec, Étoile Immobililière).

The definition of "business" in s. 248(1) includes an adventure or concern in the nature of trade. Comments in the Friesen and Bailey cases support the proposition that the a gain on the sale of real estate held in an adventure in the nature of trade does not represent income from the carrying on of a business in Canada.

Where a partner is a member of a partnership which carries on business in Canada, the partner is considered to be carrying on business in Canada notwithstanding that the partner may not itself be engaged directly in the activities of that business (Randall, Sandhu).


Randall v. The Queen, 85 DTC 5208, [1985] 1 CTC 268 (FCTD)

inactive partner carrying on buisness

A Mexican resident who was a "silent" or inactive partner in a B.C. partnership was found to have been carrying on business in Canada notwithstanding his lack of active participation in the business.

Capitol Life Insurance Co. v. The Queen, 84 DTC 6087, [1984] CTC 141 (FCTD), aff'd 86 DTC 6164, [1986] 1 CTC 388 (FCA)

only incidental presence in Canada

The mere fact that an American insurance company does business, and enters into insurance contracts as an underwriter, with a Canadian corporation does not constitute doing business in Canada. Here, "the major parts of all its insurance business activities which in any way affected Canadian lives or Canadian interests, originally took place and were controlled in the U.S.A." Such minimal activities in Canada as listing an address in Don Mills, Ontario as its Canadian head office, maintaining several small Canadian bank accounts, having the Canadian company distribute some of its brochures and appointing Canadian agents with powers of attorney, were effected primarily in order to comply with Canadian regulatory requirements rather than for business reasons. S.2(3)(b) was not applicable.

Pullman v. The Queen, 83 DTC 5080, [1983] CTC 52 (FCTD)

basic decisions of money-lending business made outside Canada

Where the basic administrative decisions in a money-lending business - the acceptance or rejection of financing opportunities made available to the Swiss plaintiff by a Canadian broker - were executed in Switzerland rather than Canada, the fact that many resultant loan transactions were closed in Canada by the broker pursuant to a power of attorney to do so, and the use by the plaintiff of a Canadian bank account, were not sufficient to render the plaintiff a person carrying on business in Canada. There was no agency relationship between them because the broker had no general power to bind the plaintiff. (The plaintiff either rejected proposed loan transactions or accepted them only after dickering over the phone as to terms.)

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 253 - Paragraph 253(b) 41

Loeck v. The Queen, 82 DTC 6071, [1982] CTC 64 (FCA)

The purchase and sale, within a 4-year period, of 4 separate properties in the Toronto and St. Catharines area by a German resident in conjunction with his Canadian partner could not be regarded as mere isolated adventures in the nature of trade but were properly characterized as transactions in the course of carrying on a business of trading in real estate.

Sudden Valley Inc. v. The Queen, 76 DTC 6178, [1976] CTC 297 (FCTD), aff'd 76 DTC 6448, [1976] CTC 775 (FCA)

merely soliciting orders in Canada

The taxpayer, which was a U.S. corporation engaged in selling lots in a recreational home development in Sudden Valley in the State of Washington advertised in Vancouver and contacted people there with a view to inducing them to visit the Sun Valley project. No representative in Canada had any authority to bind the taxpayer and the advertising did not state that there was land for sale. Contracts were signed, and payments made, in Sudden Valley.

Addy, J. stated: "At common law, it seems very clear that the Appellant was not carrying on business in Canada, for, to exercise trade in a jurisdiction, it is not sufficient to obtain orders within that jurisdiction if the sale is eventually made outside the jurisdiction...In the absence of any other evidence that a person was carrying on business in a particular jurisdiction, the place where the contracts are made is decisive."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 253 - Paragraph 253(b) 162

Sandhu v. The Queen, 80 DTC 6097, [1980] CTC 158 (FCTD)

partner carries on partnership business

A non-resident partner of a Canadian partnership is ipso facto carrying on business in Canada.

See Also

Gulf Offshore N.S. Limited v. The Queen, 2006 DTC 2705, 2006 TCC 246

fully-crewed vessel

The taxpayer, who provided a fully-crewed vessel under a charter party to a Canadian company for use during an 88 day period in the transporting of pipe and other material from Nova Scotia to two ships laying pipe off the coast of Nova Scotia within the Sable Island offshore area, was found to be carrying on business in Canada in that year.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 5 184

AAi. FosterGrant of Canada Co. v. Canada (Commissioner of the Canada Customs and Revenue Agency), [2004] 3021 ETC, 2004 FCA 259

The taxpayer, which was a wholly-owned subsidiary of its U.S. parent, and which took title to goods upon their delivery to a warehouse facility owned by its U.S. parent and sold those goods to Canadian retailers, with the goods being delivered directly from the warehouse to those customers, was found to be carrying on business in Canada so that it was a "purchaser in Canada" for purposes of the Valuation for Duty Regulations. Sharlow J.A. stated (at para. 20):

In essence, the CITT adopted the principle that a corporation is not carrying on business if its affairs are subject to significant de facto control by the parent corporation. There is no authority for that proposition ...

Munich Reinsurance Co. (Canada Branch) v. The Queen, 2000 DTC 2009 (TCC)

Bowman A.C.J. found (at p. 2015) that although refund interest was not referable to property held in the course of carrying on a business in Canada for purposes of s. 138(9), it nonetheless was:

"income from a business carried on in Canada. Its genesis is the income earned from the appellant's business in Canada upon which the appellant has an obligation to pay tax and in respect of which it must make instalment payments. It is not from casual investments made independently of its business. The reason for instalment payments is that the appellant has a business here which requires it to make such payments even though for business reasons the appellant decided to make larger instalment payments than were necessary."

Arbutus Gardens Apartments Corp. v. The Queen, 98 DTC 1795, [1998] 3 CTC 2972 (TCC)

apartment complex requiring 5 managers was business

A limited partnership having non-resident limited partners was found to be carrying on business for purposes of s. 2(3) of the Act and Regulation 805 given that the apartment complex owned by it (consisting of seven buildings) was operated in a manner that involved the hiring of five full-time managers, two full-time maintenance persons, two full-time gardeners and entailed the provision of far more services to the tenants (many of whom were seniors) than would normally be the case in an apartment building. Accordingly, rents received were not subject to withholding tax. Bowman TCJ. noted (at p. 1798) that "the fact that the income is rental income and on one view of the matter might be seen as income from property is not inconsistent with the income being from the carrying on of a business".

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 805 apartment complex requiring significant property management generated business income 134

Valec S.A. v. The Queen, 98 DTC 1266 (TCC)

servicing of office building tenant

In finding that non-resident corporations that owned undivided shares in a Montreal office building that was rented primarily to one tenant derived income from a business rather than income from property therefrom, Lamarre Proulx TCJ. stated (at p. 1271):

"The evidence disclosed that the appellants provided day-to-day security services, with note-taking and reports to be submitted, daily maintenance services not only in access zones but in the leased premises themselves, daily janitorial services, the services of an attendant responsible for air conditioning, heating and electricity and the services of a parking attendant, that all these services were supervised by senior manages and that in 1993 the income from operating expenses was as high as the fixed amount of the rental."

GLS Leasco Inc. v. MNR, 86 DTC 1484, [1986] 2 CTC 2034 (TCC)

purchased and leased equipment in Canada

A wholly-owned U.S. subsidiary ("GLS") of another U.S. corporation ("Centra") was denied the recognition of non-capital losses on the basis that it was not carrying on business in Canada, and an indirect wholly-owned Canadian subsidiary ("McKinlay") of Centra was assessed withholding tax on rental payments made by it to GLS in respect of transportation equipment leased to it by GLS. In finding that GLS was carrying on business in Canada, Brulé T.C.J. noted that although GLS did not have a permanent office in Canada nor employees, it purchased the equipment in Canada, leased the equipment to McKinlay for use in Canada, deposited the lease payments to a Canadian bank account before the funds were transferred to the U.S., and that it used a McKinlay office to sign documentation (including the leases) and as a mailing address.

Hull v. Wilson (1995), 128 DLR (4th) 403 (Alta. C.A.)

The only connection of the appellant with the State of Idaho was as a purchaser of goods there and as a party to an agreement with an Idaho manufacturer of trailers appointing the appellant as a distributor of trailers in Northern Alberta. Accordingly, the appellant did not carry on business in Idaho for purposes of the Enforcement of Judgments Act (Alberta). O'Leary J.A. noted (at p. 408) that definitions of "carry on" "indicate that there must be some direct or indirect presence in the state asserting jurisdiction, accompanied by a degree of business activity which is sustained for a period of time".

Grocott v. The Queen, 95 DTC 0 (TCC)

Bowman TCJ. found that the taxpayer was carrying on business in Canada by virtue of being a limited partner in a limited partnership that financed broker commissions.

T.D.I. Hospitality Management Consultants Inc. v. Browne (1994), 117 DLR (4th) 289 (Man. C.A.)

The appellant, who resided and had an office in Alberta, made arrangements by telephone for a musical group to perform at the respondent's inn in Manitoba and prepared the contract in Alberta.

Helper J.A. found that the appellant was not carrying on business in Manitoba for purposes of the Reciprocal Enforcement of Judgments Act (Manitoba) after noting that two of the criteria in Dicey & Morris, The Conflict of Laws for determining whether a corporation is carrying on business in a jurisdiction are that the business must have some fixed place in the jurisdiction, and the business must have been carried on for a substantial period of time.

Étoile Immobililière S.A. v. MNR, 92 DTC 1984, [1992] 2 CTC 2367 (TCC)

large rental complex, requiring day-to-day effort, was a business

A large rental complex consisting of 158 townhouses and related facilities such as playgrounds, a large outdoor pool and a large underground parking area and that was actively managed by an independent property management company, was found to have given rise to business losses in years prior to the sale of the property by the non-resident corporate taxpayer. In noted that she would have come to this conclusion even in the absence of the rebuttable presumption that income earned by a corporation within its corporate objects is business income, Lamarre Proulx J. stated (p. 1990):

"It was as a result of a constant day-to-day effort that the complex attained a certain profitability and a state of good order. Furthermore, because of the very nature of the real property complex, with its rows of rental units, its vast corridors, the roof surface, small gardens, alleys, pool, number of employees, numerous tasks to be performed, not to mention security, one cannot say that this was passively earned property income ..."

Lainiere de Roubaix F.A. v. Craftsman Distributors Inc., [1991] 5 WWR 217 (BCCA)

A French company which shipped yarn from France to fill orders placed in Canadian dollars by the B.C. defendant, drew several payments on a B.C. branch of a Canadian bank, had no office or telephone number in B.C., had no officers or employees resident there, and was not registered as an extra-provincial company, was found not to be carrying on business in B.C. within the meaning of the Company Act (B.C.).

The Queen v. London Life Insurance Co., 90 DTC 6001, [1990] 1 CTC 43 (F.C.A)

Stone J.A. rejected a submission that the determination of whether a business was carried on in a country other than Canada "should depend solely on whether profits in substance arose from the taxpayer's activities in that country".

Hafton Properties Ltd. v. McHugh, [1987] BTC 18 (HCJ)

mere making of secured loans

Although a business can be carried on directly in the U.K. by an overseas person without having a branch or agency in the U.K., the lending of money to a U.K. resident, where the loan is secured by U.K. property and the interest is paid in the U.K., does not by itself constitute carrying on business in the U.K.

Geigy (Canada) Ltd. v. Social Services Tax Commissioner, [1969] CTC 79 (BCSC)

merchant's business where sales contracts concluded

The appellant manufactured drugs in Montreal and sold them to wholesalers and institutional customers across Canada pursuant to orders that were accepted by it in Montreal. Delivery was made in Montreal to carriers who delivered the goods to the customers. It employed a small sales force in British Columbia who called on institutions and pharmacists in order to promote orders that, in most cases, would be sent directly to Montreal or to the wholesale distributors.

In finding that the appellant was not carrying on business in British Columbia for purposes of s. 3(3) of the Social Services Tax Act (BC), Wilson C.J. applied the proposition stated in Maclaine and Co. v. Eccott, [1926] AC 424 that "'in the case of a merchant's business, the primary object of which is to sell goods at a profit, the trade is (speaking generally) exercised or carried on ... at the place where the contracts are made'."

Firestone Tyre & Rubber Co. Ltd. v. Lewellin (1957), 37 TC 111 (HL)

manufacturing trade exercised in UK notwithstanding place of distributorship contracts

tThe taxpayer ("Brentford"), which was a U.K. subsidiary of a U.S. corporation ("Akron") manufactured tires for sale, as agent for Akron, to distributors of Akron located in various countries including Sweden. In affirming a finding that the profits from the sales constituted income of Akron from a "trade exercised within the United Kingdom" notwithstanding that master distributorship agreements between Akron and the distributors were made outside the U.K., Lord Radcliffe stated (p. 143):

The sales to look at ... were the dealings which took place in the course of trade between Brentford and the Swedish distributor, and those dealings consisted of invitations to trade received by Brentford in England, the manufacture or appropriation of stock in England in response to those invitations, the delivery of the stock free alongside vessel in England in discharge of the order, and the receipt of the payment in a bank in England. These operations constituted the exercising of a trade in England.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Agency - Agency 36

Belfour v. Mace (1925), 13 TC 539 (CA)

sales contracts concluded in jurisdiction

A firm of Italian silk manufacturers and merchants was found to be exercising a trade in the U.K. in light of its practice of having its acceptance of orders made by English customers communicated by its English agent, thereby establishing that the sales contracts were habitually made in England.

Weiss, Biheller & Brooks, Ltd. v. Farmer (1922), 8 TC 381 (CA)

agent distributor

The taxpayer, which was an English company carrying on business as an importer and merchant, and which was the exclusive distributor of gas mantles manufactured by a Dutch company, was found to have been properly assessed as agent for the Dutch company in respect of profits derived by the Dutch company in carrying on a trade within the United Kingdom as vendor of the gas mantles, notwithstanding that there was no privity of contract between the English customers and the Dutch company, and that property in the mantles may have passed to the taxpayer.

F.L. Smidth & Co. v. F. Greenwood (1921), 8 TC 200 (CA), aff'd 206 (HL)

mere installation in jurisdiction

The taxpayer, which manufactured cement-making equipment in Denmark, delivered the machinery F.O.B. at Copenhagen, and concluded the sales contracts in Denmark was found not be exercising a trade in the United Kingdom notwithstanding the maintaining of a sales office in London where a full-time employee inspected the site of proposed installations, forwarded samples to Denmark for testing, and superintended installations of the machinery. Atkin L.J. stated (p. 204) that the critical question was "where do the operations take place from which the profits in substance arise?"

Linde Canadian Refrigerator Co. v. Saskatchewan Creamery Co. (1915), 51 SCR 400

machinery installation in jurisdiction

iThe appellant, whose head office was in Quebec, sold machinery to purchasers in Saskatchewan. Conflicting views were expressed by Anglin J. and Idington J. as to where the installation of the machinery in Saskatchewan by an engineer employed by the appellant was sufficient to require the appellant to take out an extra-provincial licence under the Foreign Companies Act (Saskatchewan) in order to maintain an action in the province.

Grainger & Son v. Gough (1896), 3 TC 462 (HL)

soliciting orders was merely ancillary

In finding that a French wine producer was not exercising a trade in the U.K. by virtue of English agents receiving orders for the wine and transmitting them to France for approval, Lord Hurschell stated (p. 467):

"If all that a merchant does in any particular country is to solicit orders, I do not think that he can reasonably be said to exercise or carry on his trade in that country. What is done there is only ancillary to the exercise of his trade in the country where he buys or makes, stores, and sells his goods."

Administrative Policy

2021 Ruling 2019-0800191R3 - Carrying on business in Canada.

a Canadian sub providing computer and admin/ marketing support services to its non-resident parent would not cause the parent to carry on business in Canada
Proposed transaction

The services agreement of Canco (which carries on business in Canada through its own employees) with another non-resident corporation in the group (Top Foreignco) will be replaced by a similar services agreement with the immediate non-resident parent of Canco (Foreignco). Pursuant to a new services agreement with Foreignco, Canco will provide “Computer Services” and “Other Support Services” to Foreignco and other non-resident members of the group in consideration for reasonable fees. The “Computer Services” will entail the use of a Canadian server owned by Canco for hosting internal and external web hosting, electronic mail, time and billing systems, design program development services, maintenance of client data systems (data storage and backup, restore and patching services) and central network management (enterprise and network architecture) and support services (user training, and help desk). “Other Support Services” means accounting, financial, anti-money laundering, compliance, administrative support, information resources management and marketing services. The new services agreement will specify that Canco will not have the authority to execute or deliver any contract, agreement or instrument in the name of, or on behalf of, or to act as agent of, Foreignco or any other non-resident member of the group.


Canco’s provision of the services pursuant to the new services agreement to Foreignco and the other non-resident members of the group will not by itself cause any of them to be carrying on business in Canada for the purposes of ss. 2(3)(b) and 115(1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(ii) provision of support services to NR parent did not cause the parent to carry on business in Canada 126

Guidance on international income tax issues raised by the COVID-19 crisis, CRA Webpage 31 March 2021

CRA referred to the travel restrictions imposed by governments or businesses in response to the COVID-19 crisis as a safety measure for their citizens or employees (the “Travel Restrictions”) and to the following administrative response of CRA (being a concession rather than an interpretive approach) which will apply from March 16 until June 29, 2020, unless extended.

Days if presence in Canada due to COVID-19 Travel restrictions might not count towards being considered to carry on business in Canada

  • If a non-resident which is not resident in a treaty country can demonstrate that it has crossed the threshold of carrying on business in Canada only because of the Travel Restrictions, CRA “will consider whether administrative relief is appropriate on a case-by-case basis.”

16 March 2018 Ruling 158124

USco not carrying on business in Canada by virtue of extensive marketing assistance (without client contact) work provided by Canadian affiliate

As a small part of its business, a U.S. resident who is not registered for GST/HST purposes (“USco”) supplies information services to Canadian businesses and individuals, who subscribe by credit card through a website hosted on a U.S. web server and with the information services being delivered electronically to them from that server. USco, whose personnel for the most part do not visit Canada, will now receive expanded assistance respecting marketing to its Canadian customers from its Canadian resident affiliate ("Canco"), which heretofore has only provided it with customer address and contact information and other data. The "New Services" include most of the leg work involved in marketing including strategy development, weekly “prospecting” of accounts, assistance in the preparation of term sheets and proposals for delivery to prospective clients and in the negotiation of contract terms and drafting contracts, use of the Canco website as a portal in communicating with current and prospective purchasers and attending key trade events to promote the USco information services.

The Services Agreement between Canco and USco stipulates that Canco is not acting as agent of USco; and Canco does not have contact with the customers.

There is no statutory definition of carrying on business in Canada for ETA purposes. CRA ruled that USco, following the New Services addition, is not carrying on business in Canada for GST/HST purposes.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 240 - Subsection 240(1) USco’s use of a Canadian affiliate for substantial marketing support for web-delivered services did not constitute carrying on business in Canada 356
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part V - Section 5 zero-rating of marketing assistance provided by Canco to U.S. affiliate 186

27 November 2017 External T.I. 2017-0731441E5 - Interchange Canada and Business Number

NR corp carrying on business in Canada by virtue of being reimbursed for payroll costs of seconded employee

A non-resident employee of a non-resident corporation (NRCo) will work for a year at a Canadian government department while remaining on the NRCo payroll as an NRCo employee. The Department would reimburse NRCo for the employee’s salary and benefits (with no mark-up thereof). In finding that NRCo would be required to file a T2 return by virtue of carrying on business in Canada, CRA stated:

[A] non-resident employer that sends an employee to Canada to exercise employment duties for the employer for one year would generally be rendering services in Canada. As such … NRCo would be carrying on business in Canada.

… We are not aware of any exceptions to the requirement to file a T2 where the non-resident corporation has no profit from the business carried on in Canada.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 150 - Subsection 150(1) - Paragraph 150(1)(a) a non-resident corporation is carrying on business in Canada by virtue of being the legal employer of an employee seconded to Canada 179
Tax Topics - Income Tax Regulations - Regulation 102 - Subsection 102(1) NR company seconding employee to Canada subject to Reg. 102 withholding requirement but not EI or CPP 173
Tax Topics - Income Tax Regulations - Regulation 105 - Subsection 105(1) salary reimbursement payments made to seconding NR employer subject to withholding 121

9 February 2012 External T.I. 2008-0280941E5 F - Foreign sourced income - transportation

incidental business activities in jurisdiction may not constitute carrying on business there

In the course of a general discussion of s. 4(1)(b), CRA stated:

If a taxpayer's business activities in a foreign country are incidental to its Canadian business, it may be reasonable to consider that the taxpayer is not carrying on business in the foreign country.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(b) s. 4(1)(b) generally applied on a jurisdictional basis 157
Tax Topics - Income Tax Act - Section 126 - Subsection 126(9) s. 4(1)(b) applied for s. 126(9) purposes 161
Tax Topics - Income Tax Act - Section 126 - Subsection 126(7) - Business-Income Tax NY franchise tax qualified as an income tax only if it was not based on non-income specified minimums 238


Ruling that a Canadian company engaged by a non-resident fund manager to provide accounting and clerical services in Canada would not thereby cause the fund or its manager to be considered to be carrying on business in Canada.

30 October 1997 External T.I. 9716735 - : Taxation of Non-Resident Partners

A non-resident limited partner of a partnership which carries on business in Canada through a Canadian permanent establishment is considered to be carrying on business in Canada through a Canadian permanent establishment and is subject to tax under Part I on the share of partnership income allocated to it.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212 - Subsection 212(13.1) - Paragraph 212(13.1)(b) withholding where non-resident partnership with Cdn partners 93

30 November 1996 Ruling 9704923 - CARRYING ON BUSINESS IN CANADA - ADM. SERVICES

Where a non-resident corporation has contracted to perform certain administrative duties for other non-resident corporations, the fact that it has a non-related Canadian company perform certain accounting and clerical services for it under a sub-contract will not, by itself, cause it or its non-resident clients to be carrying on business in Canada.

31 May 1993 Memorandum (Tax Window, No. 32, p. 15, ¶2613)

A list of the factors considered in determining whether a taxpayer is carrying on business in Canada.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 5 16

13 January 1993 Memorandum 923695 (November 1993 Access Letter, p. 487, ¶C2-019)

Medical services performed in Canada by a non-resident doctor would constitute carrying on business in Canada.

85 C.R. - Q.20

A non-resident partner of a partnership carrying on business in Canada is considered to be carrying on business in Canada and therefore is taxable under Part I.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 114 40

IT-420R3 "Non-Residents - Income Earned in Canada"

IT-81R "Partnerships - Income of Non-Resident Partners"

Each partner is the agent of the other partners and hence, although a partner may not himself actively participate in the business of the partnership, he is necessarily carrying on the business through his agents, i.e., the 'active' partners.


Susan McKilligan, "Carrying Business in Canada", International Tax, CCH Wolters Kluwer, No. 90, October 2016, p. 13

Essential finding in Equustek (p. 13)

In Equustek Solutions Inc. v. Google Inc., [fn 1: 2015 BCCA 265.] the BC Court of Appeal dismissed Google Inc.'s ("Google") appeal, which contended that an interlocutory injunction that prohibited it from including specific websites in results delivered by its search engines should not have been granted because…[t]he application lacked sufficient connection to BC [and other grounds]…

Factual background to suit (p. 13)

[E]quustek successfully sued their former distributors for unlawful appropriation of trade secrets….Equustek obtained injunctions against the distributors, prohibiting them from carrying on any business online. Shifting their operations outside of Canada and hiding the location of their manufacturing and warehousing operations, the Defendants refused to comply with court orders to shut down their websites. Google voluntarily removed specific URLs requested by Equustek, but only on and not….

Factual basis for carrying on business in Canada (pp. 13-14)

While Google did not have servers, offices, or resident employees in BC, the courts concluded that Google "carried on business in BC" through the following activities:

  • A search engine that provided a menu of search options as soon as a user began to type of few letters…
  • Sale of advertising to BC clients…
  • The link between the free search engine and contextual advertising…
  • The gathering of information from BC residents through proprietary web crawler software ("Googlebot").

Jack Bernstein, "Electronic Commerce", Tax Profile, Vol. 6, No. 5, May 2000, p. 51.

Michael P. Boyle, "The Emerging International Tax Environment for Electronic Commerce", Tax Management International Journal, Vol. 28, No. 6, 11 June 1999, p. 357.

Constantine Kyres, "Carrying on Business in Canada", 1995 Canadian Tax Journal, Vol. 45, No. 5, p. 1629.

V. Krishna, "International Income Taxation of Electronic Commerce", Canadian Current Tax, Vol. 9, No. 4, January 1999, p. 33.

Harris, "Developments in Asset-backed Financing: Tax Considerations", Business Vehicles, Vol. III, No. 3, 1997, p. 136

It was understood that Revenue Canada has given a favourable ruling that the use of a non-resident securitization vehicle would not be viewed as entailing the carrying on business in Canada by the vehicle.

Power, "The Taxation of Non-Resident Investment in Canadian Real Estate", 1989 Canadian Tax Journal, September-October issue, p. 1266