Subsection 2(1) - Tax payable by persons resident in Canada
Cases
Fundy Settlement v. Canada, 2012 DTC 5063 [at 6881], 2012 SCC 14, 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
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... .
Nedelcu v. The Queen, 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 (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.
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)
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
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
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,
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)
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,
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
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
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
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.
Vegh v. The Queen, 2012 DTC 1131 [at 3160], 2012 TCC 95
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
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
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.
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
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.
Bensouilah v. The Queen, 2010 DTC 1018 [at 2624], 2009 TCC 440
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 Ltd. 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.
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
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
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
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, Docket: 2000-2643 (IT) G (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, Docket: 1999-2647-IT-G (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. The Queen, 2000 DTC 6365, Docket: A-527-98 (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, Docket: 97-3044-IT-G (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, Docket: 96-1454-IT-G (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 (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.
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 (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 (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 (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.
Administrative Policy
26 January 2015 T.I. 2014-0547501E5 - Certificates of residency and partnerships
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"… .
19 September 2014 Folio S6-F1-C1
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 Q. , 2013-0510851C6
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.
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 T.I. 2012-0437691E5 - Factual Resident - Missionary
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.
27 March 2013 Folio S5-F1-C1
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
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 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 T.I. 2012-0446361E5
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.
2010 STEP National Roundtable Q. 15, 2010-0363111C6
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.
2004 Ruling 2004-009965
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 2004-010311
Description in the statement of facts of the factual basis for the representation by the taxpayer that a U.S. LLC would be resident in the United States under the case-law test.
2004 Ruling 2004-009965
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.
19 July 1994 Memorandum 941315 (C.T.O. "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."
Articles
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)
One common fact situation in which the concept of CMC [central management and control] arises is where 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….the question arises naturally whether the SPV is resident in its home country because that is where its Board meets and makes decisions, or whether it is resident in the taxpayer's home country because that is where the tax advisors are directing its actions.
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.). Although the residence issue was not formally part of the appeal to the High Court, 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 of his Reasons also agreed with that determination.] 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. 1373-4)
The most recent case to consider appears to be Hua Wang Bank Berhad [[2014] FCA 1392] [fn: 26: … 1 am told by a lawyer in Australia that this case is under appeal to the Full Court. …]…This case concerned five non-Australian incorporated taxpayers. …The Commissioner assessed each of them as being taxable in Australia on the basis that they were resident there because their CMC was there. The assessments related to the taxpayers' trading in ASX-listed shares. The ATO asserted that the companies had their CMCs in Australia, in that they were completely controlled by Mr. Vanda Gould, a Sydney accountant.
The taxpayers said that their CMC was elsewhere (Samoa, London or Switzerland) because that was where the directors of the companies met or that was where the actual decisions about the share sales were made. The Commissioner argued that the arrangements in place around decision-making were a formality only and that it was "... Mr. Gould who was pulling all of the strings from Sydney."
Esquire Nominees doubted (p. 1374)
…[T]he Court did not need to go further than saying, as it did, that it did not accept this contention and that on the facts, the Boards simply rubber-stamped whatever Mr. Gould told them to do, sign or decide. But the Court went further and suggested that Esquire did not really stand for the principle for which it appears to stand, because that case concerned Esquire's residence as a corporation, rather than its residence in its capacity as trustee of the trust.
Esquire Nominees principle under attack (p. 1375)
The principle in Esquire Nominees appears to be under attack. In structuring offshore SPVs, advisors must be careful not to usurp the role of the SPV's Board and to leave it as much leeway as possible to make its own independent decisions.
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, "Income_Taxes.ca.com: The Internet, Electronic Commerce, and Taxes - Some Reflections, Part 2", 1997 Canadian Tax Journal, Vol. 45, No. 6, p. 1378.
P. Bourgeois, L. Blanchette, "Income_Taxes.ca.com: The Internet, Electronic Commerce, and Taxes - Some Reflections, Part 1", 1997 Canadian Tax Journal, Vol. 45, No. 5, p. 1127.
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 (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)
Commentary
A non-resident of Canada who carries on business in Canada will be subject pursuant to [pin type="subtopic" href="940-Section1151aii"]s. 115(1)(a)(ii)[/pin] 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 [pin type="subtopic" href="940-Section1151aii"]s. 115(1)(a)(ii)[/pin].
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 ([pin type="node_head" href="23-CapitalLifeInsurance"]Capitol Life[/pin]). The [pin type="node_head" href="23-Smidth"]Smidth[/pin] 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 ([pin type="node_head" href="23-Grainger"]Grainger[/pin]). 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 [pin type="node_head" href="23-Smidth"]Smidth[/pin] 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. [pin type="node_head" href="23-LondonLife"]London Life[/pin]) 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 ([pin type="node_head" href="23-Geigy"]Geigy[/pin], [pin type="node_head" href="23-SuddenValley"]Sudden Valley[/pin], [pin type="node_head" href="23-Belfour"]Belfour[/pin] v. [pin type="node_head" href="23-Belfour"]Mace[/pin]). A business of leasing equipment was found to be carried on in Canada where the equipment was leased in Canada to Canadian customers ([pin type="node_head" href="23-GLS"]GLS[/pin]) . In keeping with the [pin type="node_head" href="23-Smidth"]Smidth[/pin] 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 ([pin type="node_head" href="23-Loeck"]Loeck[/pin]). A money-lending business was found to be carried on outside Canada where the basic administrative decisions were made in Switzerland ([pin type="node_head" href="23-Pullman"]Pullman[/pin] - see also [pin type="node_head" href="23-Hafton"]Hafton[/pin]).
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 ([pin type="node_head" href="23-Arbutus"]Arbutus[/pin], [pin type="node_head" href="23-Valec"]Valec[/pin], [pin type="node_head" href="23-EtoileImmobililiere"]Étoile Immobililière[/pin]).
The definition of "[pin type="page" href="1386"]business[/pin]" in s. 248(1) includes an adventure or concern in the nature of trade. Comments in the [pin type="node_head" href="136-Friesen"]Friesen[/pin] and [pin type="node_head" href="136-Bailey"]Bailey[/pin] 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 ([pin type="node_head" href="23-Randall"]Randall[/pin], [pin type="node_head" href="23-Sandhu"]Sandhu[/pin]).
Cases
Randall v. The Queen, 85 DTC 5208, [1985] CTC 268 (FCTD)
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)
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)
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.)
Loeck v. The Queen, 82 DTC 6071, [1983] 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 775 (FCTD), aff'd 76 DTC 6448, [1976] CTC 775 (FCA)
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."
Sandhu v. The Queen, 80 DTC 6097, [1980] CTC 158 (FCTD)
A non-resident partner of a Canadian partnership is ipso facto carrying on business in Canada.
See Also
Gulf Offshore N.S. Ltd. v. The Queen, 2006 DTC 2705, 2006 TCC 246
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.
AAi. Foster Grant of Canada Co. v. CRA, [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. v. The Queen, 2000 DTC 2009, Docket: 98-881-IT-G (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, Docket: 96-2033-IT-G (TCC)
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".
Valec S.A. v. The Queen, 98 DTC 1266 (TCC)
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 (TCC)
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 (TCC)
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 (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)
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)
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)
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.
Belfour v. Mace (1925), 13 TC 539 (CA)
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)
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)
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
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)
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
1999 Ruling 992060
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 T.I. 971673
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.
1997 Ruling 970492
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.
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.
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.
Articles
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.
Commentary
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).
Corporations
Where a corporation is not deemed to be resident in Canada (for example, pursuant to [pin type="subtopic" href="1511-Section2504"]s. 250(4)[/pin] 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 ([pin type="node_head" href="23-1143132"]1143132[/pin], [pin type="node_head" href="23-CapitolLife"]Capitol Life[/pin], [pin type="node_head" href="23-WoodHolden"]Wood v. Holden[/pin]). 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 ([pin type="node_head" href="23-Fundy"]Fundy Settlement[/pin]).
Trusts
The corporate residency principle was extended to trusts in the [pin type="node_head" href="23-Fundy"]Fundy Settlement[/pin] 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 [pin type="node_head" href="23-Thibodeau"]Thibodeau[/pin] 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.)
Individuals
[pin type="subtopic" href="1511-Section2503"]S. 250(3)[/pin] 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 [pin type="node_head" href="23-Thomson"]Thomson[/pin] 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, [pin type="node_head" href="23-Bensouilah"]Bensouilah[/pin], [pin type="node_head" href="23-Gaudreau"]Gaudreau[/pin], [pin type="node_head" href="23-Minin"]Minin[/pin] - see also [pin type="node_head" href="23-Barton"]Barton[/pin], [pin type="node_head" href="23-Sherwood"]Sherwood[/pin]) - and in [pin type="node_head" href="23-Perlman"]Perlman[/pin], 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 ([pin type="node_head" href="23-Hauser"]Hauser[/pin], [pin type="node_head" href="23-Filipek"]Filipek[/pin] cf. [pin type="node_head" href="23-Laurin"]Laurin[/pin]).
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 ([pin type="node_head" href="23-Nedelcu"]Nedelcu[/pin]).
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 ([pin type="node_head" href="23-Davies"]Davies[/pin]). 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 [pin type="node_head" href="23-Glow"]Glow[/pin], [pin type="node_head" href="23-Mullen"]Mullen[/pin], [pin type="node_head" href="23-Johnson"]Johnson[/pin], [pin type="node_head" href="23-Gaudreau"]Gaudreau[/pin], [pin type="node_head" href="23-Snow"]Snow[/pin]). 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., [pin type="node_head" href="23-Levene"]Levene[/pin], 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" ([pin type="node_head" href="23-Fatima"]Fatima[/pin]).