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Liability for Tax
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Income Tax Liability S.2(1) of the Act states: An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year. This subsection is known as the “charging provision”
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Key Concepts in the Charging Provision Three important concepts: Person Resident in Canada Income for each taxation year
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Definitions Of Key Concepts: Person ssec.248(1) of the Act defines “person” to include both an individual and a corporation
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Definitions Of Key Concepts: Resident Not defined in the Act Distinctions made between: full-time resident, non-resident, and (part-time resident
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Full-time Resident The average Canadian is a full-time resident of Canada (i.e. their family, home, possessions and employment is in Canada) Residents of Canada are taxed on their world-wide (foreign & domestic) income for the full calendar year
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When a Full Time Resident is Temporarily Absent They are ‘ deemed ’ a full-time resident if they meet one of the following conditions (set out in ss250(1)): if they Sojourned in Canada for at least 183 days in total during the year, a period which need not be consecutive Is a member of the Armed Forces stationed outside of Canada at any time during the year Is an ambassador, minister, high commissioner, officers or servants of Canada serving outside of Canada, provided they were Canadian residents immediately prior to their appointment Is performing services abroad under a prescribed development program of the Government of Canada, provided they were Canadian residents within the 3 months prior to commencing their service (eg CIDA) Is a dependent child of one of the individuals above Absent residents, who are not subject to provincial tax, pay an additional 48% of the basic Federal Tax in lieu of provincial tax
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If an absence does not fit into one of the prior situations, when is a person still considered a full- time resident of Canada? To decide when an absent individual is still a full- time resident of Canada, the courts rely on Common Law Concepts of Full-time Residence The courts have held that to be considered a full- time resident of Canada there must be “a continuing state of relationship between a person and a place which arises from the durable concurrence of a number of circumstances” ( , [1921] in Britain and Thomson V. MNR , (SCC) 2 DTC 812)
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“continuing state of relationship” Primary Factors: Maintaining a dwelling, owned or leased on non-arms’ length terms Canadian residence of spouse, children and other immediate family members Maintaining personal property in Canada: furniture, clothing, cars, etc. Regularity and length of visits in Canada
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Liability for Tax - Liability for Tax Turn OFF all cell...

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