22 October 1999 External T.I. 9925025 - RESIDENCY STATUS

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Residency Status - whether acquiring a condo in Vancouver and using it as a vacation property for 3 to 4 weeks in a year would render a non-resident person resident in Canada

Position: Depending on the situation.

Reasons: In and by themselves, such ownership of a condo in Canada and the use of it as a vacation property are not conclusive to say that the owner of the condo is resident in Canada. Even if he were, as he is also a resident in Italy and his centre of vital interest is probably in Italy, he will be deemed to be a non-resident under 250(5) of the Act.

XXXXXXXXXX 992502
S. Leung
October 22, 1999

Dear Sirs:

Re: Residency Status

We are writing in reply to our letter of September 2, 1999 in which you requested an advance income ruling on your residency status at the present time and at the time when certain contemplated transactions occur.

The issue of determining residency status of a taxpayer is normally the responsibility of International Tax Services Office of the Department ("ITSO") which has the procedures and systems in place for the task. Therefore, it is the general practice of this Directorate not to issue advance income tax rulings in this regard.

We understand that you have contacted ITSO with respect to the residency status issue and have received a letter from them in this regard. As some of the questions raised in your letter have not been dealt with by ITSO in their previous letter to you, we have referred your letter to them for reply.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c.: International Tax Services Office

		October 22, 1999

M. Quebec	International Section
	Director	S. Leung
	International Tax Services Office	957-2115

		992502

Residency Status - XXXXXXXXXX

Further to our telephone conversation with Ms. Judy Hardiman of your office (Hardiman/Leung) with respect to the above-noted taxpayer, we are referring an enquiry from the above-noted taxpayer to you for reply (a copy of the enquiry is herewith attached). As it is a general practice of this Directorate not to issue a ruling on the issue of residency status, we have written to the taxpayer informing him that his enquiry has been referred to you for reply. To assist you in your reply to the taxpayer, we offer the following comments.

Our understanding of the facts is that the taxpayer is a resident of Italy. He has not been a resident of Canada since XXXXXXXXXX. He is contemplating to acquire a condominium apartment or a house in the City of Vancouver which will be used as a vacation property for him and his family for three to four weeks every year. The property will not be rented out or occupied for the rest of the year. The taxpayer will own a bank account in Canada which will be used to pay management expenses of the property.

It is our view that owning a house or a condominium apartment in Canada which is solely used as a vacation property for three to four weeks annually in Canada by the taxpayer and owning a bank account in Canada to cover the management expenses of such property, in and by themselves, are not conclusive to cause the taxpayer to be considered resident in Canada for the purposes of the Income Tax Act (the "Act").

In this case even if the taxpayer were considered resident in Canada for the purposes of the Act, as the taxpayer is a resident of Italy which is a country with which Canada has an income tax convention and as the taxpayer's centre of vital interest is very likely in Italy, effective after February 23, 1998, new subsection 250(5) of the Act would operate to deem him not to be resident in Canada.

With respect to the issue of the taxation of any taxable capital gain that may be realized on the future disposition of the vacation property, where the taxpayer is a non-resident of Canada, Canada reserves the right to tax such capital gain under paragraph 1 of Article XIII of the Canada-Italy Income Tax Convention. As a non-resident of Canada, the taxpayer may be able to designate the vacation property as his principal residence within the meaning assigned under section 54 of the Act. However, the formula described in paragraph 40(2)(b) of the Act which computes the amount of the capital gain for tax purposes on the disposition of a principal residence would essentially nullify the taxpayer's ability to exclude such taxable capital gain from computing his taxable income earned in Canada. This is because under B of that formula, the most the taxpayer can claim is one year as he was not resident in Canada during the period in question. As a result, most of the taxable capital gain on the disposition of the vacation property by the taxpayer will be subject to Canadian income tax unless he disposes of the property within one year of the acquisition.

Regarding the requirement to file an income tax return, we would like to bring to your attention the provisions of paragraph 150(1.1)(a) of the Act which state that unless at least one of subparagraphs (i) to (iv) thereof applies, the taxpayer is not required to file an income tax return.

If you have any question regarding the above, please do not hesitate to contact us.

for Director
Reorganization and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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