13 October 2004 External T.I. 2004-0096301E5 - Temporary Return to Canada; Residence

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Does temporary return affect non-resident status?

Position: Probably not. Can't give definite answer without all the facts.

Reasons: Stated facts.

XXXXXXXXXX 	2004-009630
		Eliza Erskine
October 13, 2004

Dear XXXXXXXXXX:

Re: Canadian Citizen Working Temporarily in Canada

This is in reply to your email of September 22, 2004, requesting information with respect to the Canadian tax implications of returning to work in Canada temporarily. In your letter, you explain that you are a Canadian citizen who has been working abroad for the past few years. You will be working in Canada for 3 months and then you expect to be living and working outside the country for an indefinite period of time.

Our Comments

The circumstances outlined in your letter relate to a specific fact situation. We note that written confirmation of the tax implications arising out of a particular fact situation are given by this Directorate only where the circumstances or events are the subject matter of an advance income tax ruling request. Our Directorate also provides non-binding technical interpretations at no charge with respect to hypothetical scenarios. We do not provide information in the nature of tax advice, however. As a result, we cannot give you a detailed response to your question, and we advise you to consult with a tax professional. We can offer the following general comments, however, which may be helpful to you.

As you may be aware, Canada imposes tax on the basis of residence, not citizenship. Generally, if you are a resident of Canada, then you are subject to tax in Canada on all of your income from whatever source. For a detailed discussion of how residence status is determined for Canadian tax purposes, please refer to Interpretation Bulletin IT-221R3, Determination of an Individual's Residence Status ("IT-221R3") which can be obtained from our website at www.cra.gc.ca under income tax technical publications. As explained in IT-221R3, you can obtain a residence status determination from the International Tax Services Office ("ITSO"). Contact information for ITSO can be found toward the end of IT-221R3.

It is possible to be a resident of Canada while working in another country. It is also possible to be a dual-resident, that is, a resident of both Canada and another country. However, if an individual severs all of his or her significant residential ties to Canada upon leaving Canada, then the individual will generally be a non-resident of Canada after the date that he or she leaves Canada. Please refer to IT-221R3 for more detailed information. An individual who severs all of his or her significant residential ties to Canada and leaves Canada will generally be a part-year resident in the year of departure. After that date, and for as long as the individual remains a non-resident of Canada, the individual is generally only subject to tax in Canada on income that is sourced in Canada, such as income from Canadian investments, income from employment performed in Canada or services rendered in Canada, and income from disposing of taxable Canadian property. It will depend on the facts of each case (including the nature of any income received from Canada) whether any Canadian income tax return is required after that year. In your case, as you will have employment income earned in Canada, you will likely be required to file a Canadian income tax return. Your Canadian income tax liability may be limited by the terms of a tax treaty (if any) between Canada and your country of residence (assuming that you are not resident in Canada while you are working here).

Unless you become a resident of Canada by re-establishing residential ties to Canada, your tax status as a non-resident will generally be unaffected by temporary employment in Canada. Your income from such employment may be taxable in Canada, however. Income earned while you were a non-resident and for as long as you remain a non-resident is taxable as discussed immediately above. We note that it is possible that you were deemed to be employed in Canada while you were working abroad if you were being paid (directly or indirectly) by a Canadian resident and you were exempt from tax on your remuneration in the country in which you were working by virtue of an agreement or a convention which has the force of law in Canada (see paragraph 115(2)(c) of the Income Tax Act).

Please contact ITSO for further information or to discuss the tax implications of your particular situation. The Canada Revenue Agency does not provide tax advice, but we will respond to any specific questions you may have concerning your Canadian tax liability and filing requirements. For general tax information as well as access to useful pamphlets and guides designed specifically for non-residents please visit our website at www.cra.gc.ca and go to the link "Taxes" followed by the link "International and non-resident".

We trust that our comments will be of assistance to you.

Yours truly,

Jim Wilson
for Director
International and Trusts Division
Income Tax Rulings Directorate