Category Archives: Residence

Income Tax Act, International Taxation, Residence, Tax Court of Canada, Tax Treaties

Double Residents, Effect of tie breaker rules – Sas Ansari

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Double Residents – What is the effect of resident tie breaker rules in tax conventions?

Black v The Queen, 2014 TCC 12

[The FCA upheld this decision in Black v Canada, 2014 FCA 275]

In this case the Court was faced with the need to determine the domestic effect of the treaty tie breaker rules in the Canada-UK tax convention.  Conrad Black believed that he had arranged his affairs such that by interaction of the Convention with the domestic tax rules, he would able to enjoy double non-taxation on his non-Canadian source income that was not received or remitted to the UK.  He was wrong.

The TCC interpreted the treaty tie breaker rules to determine residency only for purposes of the Tax Treaty, with no effect on the residency status of the taxpayer for purposes of the Canadian ITA.  Thus, a taxpayer can be a resident of one contracting state for purposes of the treaty, and resident of the other contracting state for purposes of that other state’s domestic tax laws.  This circumstance would only give rise to a conflict resulting in the override of the domestic tax law where there was double taxation or a denial of a treaty benefit (conflict or incompatibility).  In this case, the foreign source income not taxable in the UK was taxable in Canada, as the taxpayer was a resident of Canada. Also, absent an “other income” article in a tax treaty, Canada would be able to tax all income items not specifically covered in the treaty.

ISSUES

This was an application for a determination under the Tax Court of Canada Rules, (General Procedure), section 58. The issue was whether in light of the tax treaty with the UK, Canada could assess Conrad Black tax under the ITA on the basis that Mr Black was a Canadian resident.  Specifically:

  1. Whether a determination of UK residence under article 4(2) for purposes of the convention overrides the ITA to prevent the CRA from assessing tax on certain items as a resident of Canada for purposes of the ITA?  and
  2. Whether article 27(2) of the treaty applies to allow the CRA to assess the applicant as a resident of Canada for the items assessed?

FACTS

The applicant was both a resident of Canada and of the UK in 2002, and resorted to the tie breaker rules found in Article 4 of the  Canada-UK treaty.  By application of paragraph (a) of Article 4(2) of the treaty, the applicant was held to be a resident of the UK.  Canada assessed tax on certain items on the basis that the applicant was a resident of Canada “for purposes of the Act” in 2002.

The applicant was assessed under Part I of the ITA for (a) incomes from the duties of offices or employments performed by the applicant outside of Canada; (b) various shareholder and employee benefits received; (c) taxable dividend received; (d) interest and other investment income received; (e) benefit received pursuant to ITA 15(1),(9), and 80.4(2) in respect of indebtedness owed.

Since the applicant was resident but not domiciled in the UK, he was taxable in the UK only on such portion of his UK source income remitted or received in the UK.  None of the items (save the income from duties) was taxable in the UK. The income from duties was taxable in the UK if performed in the UK even if not received or remitted in the UK, but duties performed in the US were not taxable in the UK unless received or remitted into the UK.

In respect of Canada, income received from duties performed in Canada are taxable in Canada whether the applicant was a resident or a non-resident (s 115(1)(a)(i)).  If the taxpayer was a resident of Canada for purposes of the ITA, the Canada could tax income from duties of office or employment performed outside of the UK, and the other items assessed.

ARGUMENTS

The applicant argued that he could not be a resident of the UK for purposes of the Convention and a resident of Canada for purposes of the ITA, as this would ignore provisions of the Convention and defeat its purpose of avoiding double taxation.

The applicant also argued that Article 27 of the convention did not apply to give Canada the power to tax the incomes assessed. Article 27 applies only to limit the lower withholding rates in the convention in Articles 10, 11, and 12 that relate to dividends, interest, and royalties.  Since the applicant was a UK resident by virtue of the tie-breaker rules, there was no tax in Canada from which the applicant was relieved under any provision of the Convention, thus article 27 could not come into play.

The MNR argued that Article 4(2) deems the applicant to be a resident of the UK for convention purposes only, and does not affect the domestic law concept of residence.  The effect of the convention, when applicable to a resident of Canada, is to allow either a deduction from income for the amount if the income is exempt, or claim a reduced rate of income tax if provided by the convention.

The MNR stated that Article 27 operates such that where Canada provides any relief from taxation on certain income under any provision of the convention, any income not subject to tax in the UK by reference to the amount that is remitted or received I the UK, is subject to tax in Canada.

ANALYSIS

The court notes that if the applicant is correct, then he is not liable to tax in any country on any of the items unless and until he remits or receives them in the UK.  The Court notes that here there is a flaw in the drafting of the Convention or the ITA that allows for double non-taxation, it is not the court’s role to remedy the flaw.

In interpreting the relevant articles of the Canada-UK convention, the TCC referred to: (1) Article 31(1) of the Vienna Convention on the Law of Treaties – treaty to be interpreted in good faith and in light of its object and purpose; (2) The Queen v Crown Forest Industries Limited et al,  [1995] 2 S.C.R. 802 – the paramount goal of finding the meaning of the words in a treaty involves taking a liberal and purposive approach by looking at the language as used and the intention of the parties, and extrinsic materials used to illustrate and illuminate the parties’ intentions; and (3) Swathe v R, 1994 CarswellNat 1020 (FCA) – interpretation of a treaty must be a functional one where the whole scheme is considered in light of its intent, object, and spirit.

The TCC turned its mind to Article 4, and stated that the purpose of the convention is to avoid double taxation, but that in Canada a tax treaty’s purpose today is “the allocation of the taxing power between the country of the income’s source and the taxpayer’s country of residence” (para 23).  If there is a conflict between the applicant being a resident of the UK for purposes of the convention and a resident of Canada for purposes of the ITA, then by virtue of subsection 30(2) of the Convention Act the convention will prevail.  However, since the convention states that the person is a resident for the purpose of the convention itself and nothing else, there is no inconsistency.  “Article 4 determine whether or not a taxpayer who is a resident of Canada and the UK is eligible for relief under the convention as a resident of either the UK or Canada” (para 27).

The TCC stated that to hold that a person deemed to be a resident of the UK for purpose of the convention is therefore a non-resident of Canada for purpose of the ITA is wrong and reflects a mechanical approach to interpreting the convention and goes beyond the convention’s intention.  The Court referred to Friends of the Oldman River Society, [1992] 1 S.C.R. 3, and stated that to be inconsistent two provisions must be either contradictory or unable to stand together.  The court also referred to the commentary of the OECD model treaty, and concluded that the tie breaker rules only give preference or priority of claim to one of the two contracting states (para 33).  The domestic law of neither country is overridden, and neither countries claim is extinguished.  The OECD Model Convention preliminary remarks also make it clear that the concept of “resident of a Contracting state” serve the purpose of solving cases where double taxation arises in consequence of double residence (para 43).

The TCC noted that the applicant could not point to any operative articles of the convention that would be contravened by him being a resident of Canada for ITA purposes, that there is no double taxation, and that if the income is eventually remitted to the UK the taxpayer could make use of Article 21 of the convention.  The court concluded:

[51]        Article 4(2) provides preference criteria for instances where a taxpayer is a resident of both contracting states. These tiebreaker rules deem a dual resident to be a resident of either Canada or the U.K. for the purposes of the Convention. Once a taxpayer is a resident of either the U.K. or Canada for the purposes of the Convention, the other Articles of the Convention operate to relieve taxation and allocate taxing authority. That is what the Convention does: it allocates to each country the authority to tax. That a person is resident of the U.K. for Convention purposes does not affect his or her status under Canadian law for non‑treaty purposes

[52]        As respondent’s counsel stated, Canada is required by international law to implement the substance of the provisions of the Convention. To respect its obligation, Canada need not treat the applicant as a non‑resident of Canada for the purposes of the Act. Canada’s responsibility is to insure that the applicant can obtain relief from Canadian taxation to which he is entitled under the Convention.

[53]        In summary, a liberal and purposive approach must be adopted when interpreting tax treaties, not a mechanical approach. I must look to the plain language of the treaty and to the intent of the parties. When looking for an inconsistency between the Act and a tax convention, it is the results that should be examined. An inconsistency only occurs if the result of the application of the Act is in contradiction with, or in violation of, the purposes of the Convention and I have not found this to be.

The Court did not need to do so, but addressed the relevance of Article 27(2) of the Convention, which addressed the UK tax treatment of non-domiciled residents of the UK who are required to pay tax on foreign income only when it is remitted or received in the UK.  This article only operates to provide treaty relief for items actually taxable in the UK.  Also, unlike to other conventions that Canada is a party to, the UK convention does not limit the Canadian income taxation of non-Canadian source income of Canadian residents who are also resident of the UK.

A tax treaty determines the tax treatment of income on an item by item basis. If a treaty does not contain a “other income” provision, then countries where the taxpayer are resident retain the right to tax that taxpayer on that item of income.  The “other income” Article for the UK-Canada Tax treaty, Article 20(A), was added later and does not apply to the 2002 tax year.  Therefore, for the 2002 tax year, income items not specifically dealt with in the treaty were taxable by Canada in the same manner as any other resident of Canada would be taxable on those items.

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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250(5), Income Tax Act, Residence, Tax Court of Canada, Tax Treaties

Dysert v The Queen, 2013 TCC 57

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Factual Resident, Deemed Resident, Treaty Tie-Breaker Rules

Dysert v The Queen, 2013 TCC 57

At issue was whether three  American citizens who provided professional services to a Canadian corporation were taxable in Canada or not?

The Court found that the taxpayers sojourned in Canada for more than 183 days in a 12 month period and were deemed by the ITA to be residents of Canada. However, in applying the US- Canada tie breaker rules the court held that though they had permanent homes in both countries, the appellants center of vital interests was in the US and not Canada. Thus, they were deemed by 250(5) to be non-residents of Canada.

FACTS

The taxpayers provided professional consulting services to Syncrude on a two-year contract. Their professional careers had always been in the US.  Other than the years they provided services to Syncrude they lived their entire lives in the US.

They had adult children, significant homes, their extended and immediate families and loved ones lived in the US.  They had personal effects in the US, and financial assets in the US.  Nothing in their lives was related to Canada at all before the contract.

After being recruited and agreeing to a contract with Syncrude, the appellants arrived in Edmonton with their suitcases and briefcases, leaving all their assets in the US.  They leased modest accommodations in the same complex. They bought modest furniture and after the contract 90% of the furnishings they bought went to good will, only taking their clothing, books, technical manuals, and filing cabinets with them back to the US.  They kept their US driver’s licences and leased Toyotas from the same dealership, maintaining AAA not CAA coverage.  They kept their US cell phones, life insurance and health insurance, though they obtained the Alberta health insurance that is made generally available to such temporary workers.

They each had one Canadian bank account used for day-to-day living expenses in Canada.  They went back to the US almost monthly to visit family and conduct other business, their families coming to Alberta or very short periods of time.  They were present in Canada for more than 183 days in the relevant years.

Taxpayers’ Argument

The taxpayer’s argued that they were not Canadian resident or deemed to be residents, and in any case the ‘tie-breaker’ rules in the Canada-US tax treaty results in them not being Canadian residents.  They said that their apartments in Edmonton were not permanent homes, or that their center of vital interests was closer in the US, and that their habitual abodes were in the US.

Crown’s Argument

The Crown took the position that the appellants were residents or deemed residents as sojourners in Canada and that the tie-breaker rule finds them to be Canadian residents because the Edmonton apartments were permanent homes, and they have closer personal and economic connections to Canada or have their habitual abode in Canada for the years in question

Court’s Analysis

The court stated that, first, it would be necessary to determine if the Appellants were residents of Canada for the purposes of the ITA, which has two components (1) factual residents, (2) deemed residents.  If the appellants are residents of Canada, then there is a need to see what the tie-breaker rules result in. The court summarized the tie-breaker rules in the Canada-US treaty:

(i)        The hierarchy of the paragraph 2 tie-breaker rules begins by deeming a dual resident to be a resident of the country in which he had a “permanent home available to him”. It is conceded that each Appellant had a permanent home available to him in the US. The first issue to be decided under the Treaty is whether the Appellants also had permanent homes available to them in Canada. If their Alberta living arrangements did not constitute permanent homes, they will be deemed to be residents of the US, and not Canada, for purposes of the Treaty and the Treaty analysis will end there.

(ii)      If their Alberta living arrangements are found to have also been permanent homes available to them, then paragraph 2(a) requires the Court to next determine whether their “centres of vital interest”, being the country with which their “personal and economic relations were closer”, can be determined. If it can be determined they will be deemed to have been residents of that country, and not the other country, and the Treaty analysis will end there.

(iii)      If their centres of vital interest cannot be determined, the Court must determine whether they had an “habitual abode” in either or both countries. If they had an habitual abode in one country and not in the other, they will be deemed to have been residents of the former country, and not the latter, and the Treaty analysis will end there.

(iv)      If they had “habitual abodes” in both Canada and in the US, or in neither country, the Appellants will be deemed to have been residents of the US, and not residents of Canada, for purposes of the Treaty by virtue of their sole US citizenship and no further inquiry need be made.

If after the application of the tie-breaker rules they remain Canadian residents, they are properly taxable as such in Canada, and if they are determined to be US residents then subsection 250(5) deems them to be non-residents.

Factual Residence

The Court referred to the decision in Thomson v. Minister of National Revenue, [1946] S.C.R. 209, and identified the factors relevant to this determination as:

47     The gradation of degrees of time, object, intention, continuity and other relevant circumstances, shows, I think, that in common parlance “residing” is not a term of invariable elements, all of which must be satisfied in each instance. It is quite impossible to give it a precise and inclusive definition. It is highly flexible, and its many shades of meaning vary not only in the contexts of different matters, but also in different aspects of the same matter. In one case it is satisfied by certain elements, in another by others, some common, some new.

48         The expression “ordinarily resident” carries a restricted signification, and although the first impression seems to be that of preponderance in time, the decisions on the English Act reject that view. It is held to mean residence in the course of the customary mode of life of the person concerned, and it is contrasted with special or occasional or casual residence. The general mode of life is, therefore, relevant to a question of its application.

49         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. Ordinary residence can best be appreciated by considering its antithesis, occasional or casual or deviatory residence. The latter would seem clearly to be not only temporary in time and exceptional in circumstance, but also accompanied by a sense of transitoriness and of return.

50         But in the different situations of so-called “permanent residence”, “temporary residence”, “ordinary residence”, “principal residence” and the like, the adjectives do not affect the fact that there is in all cases residence; and that quality is chiefly a matter of the degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question. It may be limited in time from the outset, or it may be indefinite, or so far as it is thought of, unlimited. On the lower level, the expressions involving residence should be distinguished, as I think they are in ordinary speech, from the field of “stay” or “visit”.

 

Estey, J.

71        A reference to the dictionary and judicial comments upon the meaning of these terms indicates that one is “ordinarily resident” in the place where in the settled routine of his life he regularly, normally or customarily lives. One “sojourns” at a place where he unusually, casually or intermittently visits or stays. In the former the element of permanence; in the latter that of the temporary predominates. The difference cannot be stated in precise and definite terms, but each case must be determined after all of the relevant factors are taken into consideration, but the foregoing indicates in a general way the essential difference. It is not the length of the visit or stay that determines the question. Even in this statute under section 9(b) the time of 183 days does not determine whether the party sojourns or not but merely determines whether the tax shall be payable or not by one who sojourns.

 

Kerwin, J.

2         There is no definition in the Act of “resident” or “ordinarily resident” but they should receive the meaning ascribed to them by common usage. When one is considering a Revenue Act, it is true to state, I think, as it is put in the Standard Dictionary, that the words “reside” and “residence” are somewhat stately and not to be used indiscriminately for “live”, “house” or “home”. The Shorter Oxford English Dictionary gives the meaning of “reside” as being “To dwell permanently or for a considerable time, to have one’s settled or usual abode, to live, in or at a particular place”. By the same authority “ordinarily” means “1. In conformity with rule; as a matter of regular occurrence. 2. In most cases, usually, commonly. 3. To the usual extent. 4. As is normal or usual”. On the other hand, the meaning of the word “sojourn” is given as “to make a temporary stay in a place; to remain or reside for a time”.

The court also referred to The Queen v. Kenneth F. Reeder, 75 DTC 5160:

13        While the Defendant here is far removed from the jet set, including any possible imputation of a preconceived effort to avoid taxation, the factors which have been found in those cases to be material in determining the pure question of fact of fiscal residence are as valid in his case as in theirs. While the list does not purport to be exhaustive, material factors include:

(a)  past and present habits of life;

(b)  regularity and length of visits in the jurisdiction asserting residence;

(c)     ties within that jurisdiction;

(d)  ties elsewhere;

(e)  permanence or otherwise of purposes of stay abroad.

And to Gaudreau v. The Queen, 2005 DTC 66:

33        I adopt the reasoning of Mahoney, J. in the Reeder case, at page 5163:

The Defendant was at a stage in life when he was highly mobile. He was able, willing, even eager, to travel. In that, he was not atypical of his contemporaries and the relevant factors must be considered in that context. It is not contested that he was, before March 29, 1972 and has, since December 1, 1972, been resident in Canada. 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. That absence was temporary even though, strictly speaking, indeterminate in length. The ties in France were temporarily undertaken and abandoned on his return to Canada.

I am satisfied that had the Defendant been asked, while in France, where he regularly, normally or customarily lived, Canada must have been the answer. I find that the Defendant was resident in Canada throughout all of 1972.

34     In my view, the same can be said here. Throughout his sojourn in Egypt, the appellant’s 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. As a matter of fact, the ties in Egypt were temporarily undertaken and abandoned on his return to Canada. As Rip, J. stated in the above cited passage from Snow, supra, a person’s temporary absence from Canada does not necessarily lead to a loss of Canadian residence when close personal and economic ties are maintained in Canada. I therefore conclude that the appellant was ordinarily resident in Canada during the years at issue

And to Mahmood v. The Queen, 2009 TCC 89:

 [60]      The evidence does show that the Appellant had some ties to Canada in the years in question. His mother lived in a condominium which he owned. He stayed in the condominium when he came to Canada. One of his sons also lived there, along with his sister, who stayed there from time to time. The Appellant used the Canadian financial system to deposit funds, exchange currency and ultimately pay the foreign suppliers of his business. He attended the local mosque near the condo that he owned in Canada. He had a car available to him that was parked at the condo. He went on camping trips with friends and visited Niagara Falls at least seven times.

[61]      In my view, these facts are not sufficient to make the Appellant a resident of Canada for the purposes of the Act. The condominium, while owned by the Appellant, was really his mother’s home and not his own. His mother has lived there the entire time. The Appellant lives at the family home in Guyana with his wife and his three children.

[62]      The Appellant’s Canadian activities are similar to the activities of other non‑residents carrying on business in Canada. One can be a non-resident of Canada and own real estate in Canada at the same time. Section 116 of the Act and Part XIII deal with these cases. The former provision applies when a non-resident sells property and the latter when a non-resident collects, among other things, rental income.

[63]      In the event that I am wrong and Canada is the Appellant’s home in the same way Guyana is, I find that the tiebreaker rule in paragraph 4(2)(a) of the Convention makes him a resident of Guyana for the purposes of the Act. The Appellant’s family and economic interests are more closely tied to Guyana than to Canada.

The court then applied the law identified to the facts and determined that none of the appellants were factual residents for the time period in question.

Deemed Residents

The court then turned to the question of whether the appellants were deemed to be Canadian residents by the nature of their more than 183 stays in Canada, pursuant to paragraph 250(1)(a). The Court stated that “to sojourn generally means to temporarily stay, visit, reside or remain, in a place for a time. The nature of sojourning is an unusual intermittent stay, and is marked by a sense of transitoriness and of return to one’s usual, ordinary residence.”  The Court also agreed that day trips for work to Canada are not sojourning, but said that living in Canada is not the same as day trips to work, and concluded that the appellants were sojourning in Canada on the days they were present. Thus, they were deemed residents.

Canada-US Tax Convention

The Court began by referring to the Vienna Convention on the Law of Treaties and stated that it ”provides that a treaty is to be interpreted in good faith, in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. It also authorizes regard to subsequent practice in the application of the treaty in certain circumstances and for certain purposes, as well as the use of other supplementary means of interpretation when the interpretation of the treaty otherwise leads to a result which is manifestly absurd or unreasonable.”

Interpreting tax treaties is different than interpreting tax statutes. The focus for tax treaties are the words of the treaty and the intention of the parties. The court quoted Gladden Estate v. The Queen, 85 DTC 5188, 5191:

 Contrary to an ordinary taxing statute a tax treaty or convention must be given a liberal interpretation with a view to implementing the true intentions of the parties. A literal or legalistic interpretation must be avoided when the basic object of the treaty might be defeated or frustrated insofar as the particular item under consideration is concerned.

“Liberalism has no role to play in the interpretation of treaties” (Coblentz v The Queen, 96 DTC 6431 (FCA)).

The Court then referred to The Queen v. Prévost Car Inc., 2009 FCA 57, which referred to the interpretative importance of the OECD model treaty, and then referred to the comments of the OECD model treaty for Article IV:

4.         Conventions for the avoidance of double taxation do not normally concern themselves with the domestic laws of the Contracting States laying down the conditions under which a person is to be treated fiscally as “resident” and, consequently, is fully liable to tax in that State. They do not lay down standards which the provisions of the domestic laws on “residence” have to fulfil in order that claims for full tax liability can be accepted between the Contracting States. In this respect the States take their stand entirely on the domestic laws.

5.         This manifests itself quite clearly in the cases where there is no conflict at all between two residences, but where the conflict exists only between residence and source or situs. But the same view applies in conflicts between two residences. The special point in these cases is only that no solution of the conflict can be arrived at by reference to the concept of residence adopted in the domestic laws of the States concerned. In these cases special provisions must be established in the Convention to determine which of the two concepts of residence is to be given preference.

6.         An example will elucidate the case. An individual has his permanent home in State A, where his wife and children live. He has had a stay of more than six months in State B and according to the legislation of the latter State he is, in consequence of the length of the stay, taxed as being a resident of that State. Thus, both States claim that he is fully liable to tax. This conflict has to be solved by the Convention.

7.         In this particular case the Article (under paragraph 2) gives preference to the claim of State A. This does not, however, imply that the Article lays down special rules on “residence” and that the domestic laws of State B are ignored because they are incompatible with such rules. The fact is quite simply that in the case of such a conflict a choice must necessarily be made between the two claims, and it is on this point that the Article proposes special rules.

[…]

9.         This paragraph [2] relates to the case where, under the provisions of paragraph 1, an individual is a resident of both Contracting States.

10.      To solve this conflict special rules must be established which give the attachment to one State a preference over the attachment to the other State. As far as possible, the preference criterion must be of such a nature that there can be no question but that the person concerned will satisfy it in one State only, and at the same time it must reflect such an attachment that it is felt to be natural that the right to tax devolves upon that particular State. The facts to which the special rules will apply are those existing during the period when the residence of the taxpayer affects tax liability, which may be less than an entire taxable period. For example, in one calendar year an individual is a resident of State A under that State’s tax laws from 1 January to 31 March, then moves to State B. Because the individual resides in State B for more than 183 days, the individual is treated by the tax laws of State B as a State B resident for the entire year. Applying the special rules to the period 1 January to 31 March, the individual was a resident of State A. Therefore, both State A and State B should treat the individual as a State A resident for that period, and as a State B resident from 1 April to 31 December.

11.      The Article gives preference to the Contracting State in which the individual has a permanent home available to him. This criterion will frequently be sufficient to solve the conflict, e.g. where the individual has a permanent home in one Contracting State and has only made a stay of some length in the other Contracting State.

12.      Subparagraph a) means, therefore, that in the application of the Convention (that is, where there is a conflict between the laws of the two States) it is considered that the residence is that place where the individual owns or possesses a home; this home must be permanent, that is to say, the individual must have arranged and retained it for his permanent use as opposed to staying at a particular place under such conditions that it is evident that they stay is intended to be of short duration.

13.      As regards the concept of home, it should be observed that any form of home may be taken into account (house or apartment belonging to or rented by the individual, rented furnished room). But the permanence of the home is essential; this means that the individual has arranged to have the dwelling available to him at all time continuously, and not occasionally for the purpose of a stay which, owing to the reasons for it, is necessarily of short duration (travel for pleasure, business travel, educational travel, attending a course at a school, etc.).

14.      If the individual has a permanent home in both Contracting States, paragraph 2 gives preference to the State with which the personal and economic relations of the individual are closer, this being understood as the centre of vital interests. In the cases where the residence cannot be determined by reference to this rule, paragraph 2 provides as subsidiary criteria, first, habitual abode and then nationality. If the individual is a national of both States or of neither of them, the question shall be solved by mutual agreement between the States concerned according to the procedure laid down in Article 25.

15.      If the individual has a permanent home in both Contracting States, it is necessary to look at the facts in order to ascertain with which of the two States his personal and economic relations are closer. Thus, regard will be had to his family and social relations, his occupations, his political, cultural or other activities, his place of business, the place from which he administers his property, etc. The circumstances must be examined as a whole, but it is nevertheless obvious that considerations based on the personal acts of the individual must receive special attention. If a person who has a home in one State sets up a second in the other State while retaining the first, the fact that he retains the first in the environment where he has always lived, where he has worked, and where he has his family and possessions, can, together with other elements, go to demonstrate that he has retained his centre of vital interests in the first State.

Permanent Home – the Court held that, with reference to Wolf v The Queen, 2002 FCA 96, that the Edmonton apartments rented (continuously available to them throughout the year, appropriately furnished, with parking, and placed to cook, eat, sleep) constituted permanent homes in Canada.  They also had permanent homes in the US.

Centre of Vital Interests – This is a question of fact looking at personal and economic relations in the countries in question.  The Court referred to Gaudreau (paras 38-40) and Wolf (para 20) and Bujnowski v. The Queen, 2005 TCC 90, 2006 FCA 32 (paras 6-8), in stating that closer ties do not mean more numerous ties – closeness is a focus on the depth and nature of the personal and economic relations. The court also referred to Hertel v. Minister of National Revenue, 93 DTC 721:

14        In determining his centre of vital interests, it is not enough to simply weigh or count the number of factors or connections on each side. The depth of the roots of one’s centre of vital interests is more important than their number.

On the facts, the court concluded that the appellants center of vital interests was closer to the US than in Canada, deeming them to be residents of the US by subsection 250(5).

Habitual abode – did not have to consider.

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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