Chapter 1: Residential Ties and Determining Residency Flashcards
What are the sources for the different types of residency in Canada?
Factual residency: Jurisprudence (Case Law)
Deemed residency: ITA 250
Deemed non-residency: Tax treaties and ITA 250(5)
What is factual residence for Canadian individuals?
Factual residence refers to individuals whose job, family, dwelling, and personal property are all located in Canada, making them liable for Part I tax on their worldwide income.
What is the most important factor in determining if an individual leaving Canada remains a resident for tax purposes?
The most important factor is whether the individual maintains significant residential ties with Canada while abroad.
What residential ties are generally considered significant for establishing factual residency in Canada?
Significant residential ties include:
Dwelling (a home in Canada),
Spouse or common-law partner who remains in Canada,
Dependants (such as minor children) who remain in Canada.
What are some examples of secondary residential ties used to establish residency in Canada?
Secondary residential ties include:
Personal property in Canada (e.g., furniture, automobiles),
Social ties with Canada (e.g.,
memberships in recreational or religious organizations),
Economic ties (e.g., Canadian employment or business),
A Canadian driver’s license,
A Canadian passport.
Can secondary residential ties alone establish Canadian residency for tax purposes?
No, secondary residential ties by themselves are never sufficient to establish residency. Additional factors are required.
In the case of Simon Farr, who moved to Ireland but kept his Canadian home and CPA membership, would he still be considered a resident of Canada?
Simon Farr may still be considered a resident of Canada if he retains significant residential ties, such as his unsold home and professional membership, unless he has clearly severed these ties.
What is the primary issue with determining Canadian residency during temporary absences from Canada?
The issue is under what circumstances an individual should be viewed as retaining Canadian residency status during their period of absence from Canada.
What happens if an individual is viewed as retaining Canadian residency status during a temporary absence?
The individual will be subject to Canadian income tax on their worldwide income during the absence, with credits available for foreign taxes paid on income earned abroad.
How does the length of time abroad impact Canadian residency?
The length of time abroad is not a determining factor for residency.
Even a prolonged absence does not automatically sever Canadian residency if significant ties are maintained.
What is the key factor in determining if an individual has severed Canadian residency?
The key factor is intent. If an individual’s return to Canada is foreseeable, and they intend to return, they may retain Canadian residency status.
What is the significance of frequency of visits to Canada for determining residency?
Frequent visits to Canada, particularly if other secondary ties remain, suggest that the individual did not intend to sever Canadian residency.
How does establishing residential ties outside of Canada affect residency status?
If an individual establishes residential ties in another country, it may support the argument that they have severed Canadian residency, especially if they settle in a country where they were previously resident.
Would Jane, who canceled many of her Canadian ties but flew back to Canada regularly to visit her partner, be considered a Canadian resident during her 26-month absence?
Jane may still be considered a Canadian resident during her absence, especially due to her frequent visits and the intention to return, despite severing some ties.
