The basis for Canadian taxation
Income Tax Act
Residence of individuals – Common Law test
residence
Income Tax Act
Thomson v MNR
- It is quite impossible to give it a precise and inclusive definition. It is highly flexible, and its many shades of meaning vary not only in the contexts of different matters, but also in different aspects of the same matter.
- It must be assumed that every person has at all times a residence;
- A person may be a resident in more than one country at the same time;
- Residence is primarily a question of act;
- Intention may be relevant but not determinative;
- Residence generally involves either the taxpayer’s physical presence in the jurisdiction or the ownership of or right to occupy a building in the jurisdiction;
- Where a taxpayer has resided in Canada for a lengthy period of time, clear and irreversible measures are required to terminate this residency. In these circumstances, evidence of social and economic ties may play an important role.
Ordinarily Resident
Income Tax Act
Thomson v MNR
- … the words “ordinarily resident” are broader than the word “residing,” and that the former were used to cover a filed that the latter did not occupy. The aim of Parliament was to tax, not only the residents of Canada, those who have their permanent home, their settled abode, but also those who live here most of the time, even if they are absent on temporary occasions. The first group comes under the classification of “residents”, and the second under that of “ordinarily residents”.
Deemed provision – sojourners
Income Tax Act
Canada Revenue Agency’s position regarding residence
- Dwelling place or places;
- Spouse or common-law partner; and
- Dependents
- Personal property in Canada such as furniture, clothing, automobiles and recreational vehicles;
- Social ties with Canada such as memberships in Canadian recreational or religious organizations;
- Economic ties in Canada (e.g. employment with Canadian employer, active involvement in Canadian business, bank account, retirement accounts, credit cards and investment accounts);
- A Canadian driver’s license;
- A Canadian passport; and
- Medical and hospitalization insurance with a Canadian province or territory.
Leaving Canada
significant residential ties
- you leave Canada;
- your spouse or common-law partner and/or dependents leave Canada (if applicable);
- you become a resident of the new country.
Income Tax Act
Moving to Canada.
- Whether you have established significant residential ties such as having a dwelling place in Canada and a spouse or common-law partner that lives in Canada (Note: if you don’t relocate to Canada and simply acquire a dwelling place in Canada for your retirement in the future and in the meantime you ease the property to a non-arm’s length third-party for the period between acquiring the property and residing in it, then unless you have other residential ties with Canada, the dwelling place, in and of itself, may not be a significant residential tie).
- Whether you applied for and obtained landed immigrant status and provincial health coverage, which generally constitutes significant ties with Canada.
- Whether you establish or maintain residential ties in other countries. For example, if you are moving to Canada, the sale of a former residence in another country would support the establishment of residency in Canada.
- The CRA says that there must also be a degree of permanence to an individual’s stay in Canada or outside Canada. Therefore, they will consider regularity and length of visits to Canada in addition to the residential ties you have inside and outside Canada.
Dual residents and tax treaties
Pro tax tips – residency determination is a question of fact
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