Principal Issues: Whether you will be subject to Canadian taxation under the Canada-Singapore tax treaty where you are working in Singapore for greater than 183 days in a calendar year.
Position: Question of Fact
Reasons: see below.
XXXXXXXXXX
Dear XXXXXXXXXX:
The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence, which I received on February 28, 2012, concerning the implications of the Canada–Singapore tax treaty on income earned while working in Singapore.
You interpret Article XIV, “Personal Services,” of the treaty to mean that providing you are in Singapore for more than 183 days in the year, the income you earn in Singapore will be subject to tax only in that country and not in Canada.
As you may be aware, Canada imposes tax on income based on an individual’s status as a resident or non-resident of Canada and not on his or her citizenship. If you are a resident of Canada, you are subject to Canadian income tax on your worldwide income. Generally, non-residents are subject to Canadian income tax only on income from sources inside Canada.
Whether you are a resident or a non-resident of Canada while working in Singapore will depend on several factors. If you leave Canada, your residence status will be based on your residential ties with Canada, the length and regularity of your visits to Canada, the residential ties you establish abroad, and the purpose and permanence of your stay outside Canada.
The Canada Revenue Agency (CRA) offers many forms and publications related to international and non-resident tax obligations. For more information on residential ties and the determination of residence status, I invite you to read Interpretation Bulletin IT-221R3 (Consolidated), Determination of an Individual’s Residence Status, which is available on the CRA Web site at www.cra.gc.ca/E/pub/tp/it221r3-consolid, and Pamphlet T4131, Canadian Residents Abroad, at www.cra.gc.ca/E/pub/tg/t4131. I also invite you to read Guide T4058, Non-Residents and Income Tax, at www.cra.gc.ca/E/pub/tg/t4058 for more information on this subject.
The CRA can help you determine your residence status after considering all the relevant factors. Paragraph 27 of Interpretation Bulletin IT-221R3 (Consolidated) explains how to request a residency determination.
In interpreting Article XIV of the treaty, you must apply the provisions in the context of the country of which you are determined to be a resident. For example, if you are determined to be a resident of Canada while working in Singapore for more than 183 days, both countries will have the right to tax this income.
If Canada and Singapore have the right to tax the income you earn in Singapore, you must report the income on a Canadian income tax and benefit return and you can claim a foreign tax credit under section 126 of the Income Tax Act for the taxes paid to Singapore. This credit reduces the Canadian tax payable on foreign-sourced income. You can find out how the foreign tax credit is calculated by reading the General Income Tax and Benefit Guide. A claim for a foreign tax credit must be supported by documentation from the other country, usually a completed income tax return or tax assessment that indicates the amount of tax paid to the other country. For more information about the foreign tax credit, please see Interpretation Bulletin IT-270R3, Foreign Tax Credit, at www.cra.gc.ca/E/pub/tp/it270r3.
For additional information or if you need the CRA’s help in determining your residence status, I invite you to contact the International Tax Services Office at 1-855-284-5942, from anywhere in Canada and the United States, or at 613-952-3741, from outside Canada and the United States. The CRA accepts collect calls. You can find the hours of telephone service for the International office at www.cra.gc.ca/cntct/international-eng.html.
I trust that the information I have provided is helpful.
Yours sincerely,
Gail Shea, P.C., M.P.
Minister of National Revenue
Wayne Doiron
2012-043900