K.B. Harding (613) 957-2129
November 30, 1987
This is in reply to your letter of September 23, 1987 concerning the taxation status of you and your daughter XXXX
You indicated that pursuant to paragraph (1)(b) of Article 19 of the Canada-Austria Income Tax Convention (Convention) that you may be exempt from Canadian tax and that you expect to be subject to Austrian tax.
It is always a question of fact whether a person living outside Canada continues to be a resident of Canada. We are attaching a copy of Interpretation Bulletin IT-221 and IT-221R2 which outlines the Department's criteria for determining an individual's residence status. While it would appear that you and your daughter would probably be considered a non-resident of Canada for taxation purposes, you may confirm your taxation status with the Ottawa District Taxation Office located at 360 Lisgar Street in Ottawa by completing the attached forms.
The Income Tax Act (the "Act") states that where in a taxation year a non-resident person was an individual who had in a previous year
(1) ceased to be a resident in Canada, and
(2) was in a taxation year in receipt of salary from employment that was paid to him directly or indirectly by a person resident in Canada for purposes of the Act,
(3) he will be deemed to have been employed in Canada in the year, except to the extent
(i) that such remuneration is attributable to the duties of an office or employment performed by him outside Canada, and
(ii) is subject to an income and profits tax imposed by the government of the foreign country.
In addition, the Act also deems a non-resident of Canada to have been resident in Canada throughout a taxation year if he was, at any time in the year an officer or servant of Canada, and
(a) he was resident in Canada immediately prior to appointment or employed by Canada, or
(b) he received representation allowances in respect of the year.
Provided you and your daughter are considered non-residents of Canada for taxation purposes, you would be exempt from Canadian tax provided that the income is subject to tax in Austria except in the circumstances where you are considered to be a deemed resident of Canada. Based on your letter, it would appear that both you and your daughter would not be deemed residents of Canada since both of you only accepted appointments with the Government of Canada after becoming non-residents of this country.
We confirm that if paragraph (1)(b) of Article 19 of the Convention applies you will be taxable only in Austria and exempt from tax in Canada.
We trust these comments are adequate for your purposes and if you require any additional information, we would suggest you contact the Ottawa District Taxation Office at the address provided above.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch