LANGIND E
DOCNUM 2012-0457311E5
REFDATE 120815
SUBJECT Deemed Non-Resident
SECTION ITA 250(5)
Please note
at the time
Prenez note
représenter
that the following document, although believed to be correct
of issue, may not represent the current position of the CRA.
que ce document, bien qu'exact au moment émis, peut ne pas
la position actuelle de l'ARC.
PRINCIPAL ISSUES:
Whether or not an individual is considered to be a
deemed non-resident of Canada. The individual in question has a "habitual
abode" in a treaty country and has a spouse that remains in Canada.
POSITION:
We recommend that the individual complete and submit Form NR73
to ITSO for an opinion.
REASONS:
Insufficient information is provided by the requester to make
a residency determination. The location of the individual's "habitual
abode" is only one factor to consider in a complete examination of the
treaty tie breaker rules.
XXXXXXXXXX
2012-045731
K. Podor
August 15, 2012
Dear XXXXXXXXXX:
Re:
Deemed Non-Resident
This is in response to your email of July 31, 2012, wherein you requested
our opinion regarding whether a particular individual can be considered a
deemed non-resident. The individual has a habitual abode in a treaty
country and has severed ties with Canada, with the exception of a spouse
which remains in Canada.
Our Comments
Based on the scenario outlined in your request, the individual in question
is a resident of a treaty country. In addition, the individual’s spouse
remains in Canada. A person is also a factual resident of Canada if he or
she retains significant residential ties to Canada. Interpretation
Bulletin (IT)-221R3, paragraph 5, provides a list of residential ties of
an individual that will almost always be significant residential ties for
the purpose of determining residence status. Significant residential ties
include, among other things, a spouse or common-law partner in Canada. In
this case, it appears that the individual is also a factual resident of
Canada.
An individual, who is a resident of Canada for purposes of paragraph 1 of
the Residence Article of a particular treaty, may also be a resident of
the treaty country by virtue of the same paragraph in the same treaty. In
this situation, paragraph 2 of the Residence Article provides “tie breaker
rules” to determine in which country the individual will be resident for
-2purposes of the other provisions of the treaty. If the “tie breaker”
rules determine that the individual is a resident of another country for
the purposes of the treaty, then subsection 250(5) of the Income Tax Act
(the “Act”) will deem the individual to be a non-resident of Canada for
purposes of the Act.
The requester states that the person in question has a “habitual abode” in
the treaty country. Although, the location of an individual’s “habitual
abode” is one of several “tie breaker rules”, it is not the only test to
consider in determining residency status. A close examination of the
facts must be undertaken for each test to determine with which country the
individual’s ties are closer. IT-221R3, paragraph 26, provides guidance
on the application of the tie breaker rules in determining residency. The
treaty tie breaker tests are the location of a permanent home, centre of
vital interests, habitual abode, nationality, or an agreement between the
competent authorities.
The “permanent home” test provides that an individual is a resident, for
purposes of the treaty, in a country in which the individual has a
permanent home available to him or her. In this case, the individual has
a permanent home available in both countries. The individual has a home
in the treaty country and his or her spouse lives in Canada in a second
permanent home. In this case, the “permanent home” test will not result
in a residency determination. Where this is the case, the tie breaker
rules refer to the “centre of vital interests” test.
The “centre of vital interests” test includes a detailed review of the
individual’s personal and economic ties within each country in order to
establish which country’s ties are closer to the individual. The
Organization for Economic Cooperation and Development (OECD) Model
commentary on Article 4, Resident, provides examples of personal and
economic factors which include, among other things, the location of family
and social relations, occupation, political, cultural or other activities,
place of business, the place from which an individual administers his/her
property, etc. In this case, the fact that the individual’s spouse and/or
family remains in Canada represents a significant personal tie that
supports the determination that the individual is a resident of Canada.
We have insufficient details to undertake a complete review of all of the
factors which must be considered in making a residency determination based
on the treaty tie breaker rules. If the individual in question wishes to
obtain a non-binding opinion from the Canada Revenue Agency (CRA)
regarding his or her residence status, he or she should file Form NR73,
Determination of Residency Status (Leaving Canada) with the International
Tax Services Office. Form NR73 can be found on the CRA’s website
(www.cra-arc.gc.ca) under “Forms and Publications”.
Conclusion
An individual, that is a factual resident of Canada and a resident of a
country with which Canada has a tax treaty, may be considered a deemed
non-resident of Canada by virtue of subsection 250(5) of the Act. An
individual will become a deemed non-resident if his or her ties with
another country become such that, under the relevant tax treaty that
Canada has with the other country, the individual would be considered a
resident of that other country. This determination follows a detailed
examination of the “tie breaker rules” contained in the Residence Article
-3of the relevant treaty. The “tie breaker rules” include several tests,
one of which is the location of the individual’s “habitual abode”.
We recommend that the individual submit a completed Form NR73 to the
International Tax Services Office in order to obtain an opinion regarding
his or her residence status.
We trust these comments are helpful.
Lita Krantz, CA
Assistant Director
International Division/ Division des opérations internationales
International Section III
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch