Generally, a person must be “liable to tax” in a contracting state to be a resident there for treaty purposes. Per CRA, a person must be subject to the most comprehensive form of taxation as exists in that contracting state to be liable to tax therein. 9822230 stated: “In order to qualify as a resident [of a] contracting state which has territorial tax system, a taxpayer will generally have to be subject to as comprehensive a tax liability as is imposed by the particular state.” Can CRA provide additional guidance in this regard?
CRA noted that the residence Article of the applicable treaty generally provides that, in order to be resident of the other contracting state, the person must be “liable to tax” therein according to certain criteria, such as residence, place of management, domicile or other criteria of a similar nature. Where the treaty country has a territorial tax system, the liability of a person to tax in that state might turn on either the existence of a source of income, or the receipt of income, in that state.
CRA was asked to comment on whether a corporation that was incorporated in Singapore would be viewed as a Treaty resident of Singapore, which typically taxes income that is sourced in Singapore, or remitted to Singapore.
CRA’s conclusion was that such corporation was a resident of Singapore that could therefore benefit from the Singapore-Canada Treaty, provided that its central management and control was in Singapore at all relevant times.