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Unformatted text preview: TX1 Basic Concept Tax policy Branch o the department of finance: responsible for the development and evaluation of federal taxation policies and legislation. Canada Revenue Agency: actual collection of taxes and interpretation of tax law Tax payable by persons resident in Canada: An income tax shall be paid on the taxable income for each taxation year of every person resident in Canada at any time in the year. Persons: including corporations and anybody representing such persons. (Individuals, corporations, and trusts that represent individuals or corporations.) Full time resident: are subject to tax on their worldwide income throughout the entire calendar year. All domestic and foreign sources of income, including capital gains, must be included in the computation of net income. Non-resident person: may be subject to tax only if he was employed in Canada, carried on a business in Canada or disposed of a taxable Canadian property. The tax liability for the non- resident person would be calculated on the income from these items only, not on world income. Deemed resident: Sojourning in Canada for 183 days or more in a year Being a member of Canadian forces Performing services outside Canada under an international assistance program of the Canadian International Development Agency, if the individual was resident in Canada at any time during the three months prior to the day the services commenced; and Being an officer or servant of Canada or province if, immediately prior to the appointment, the individual was resident in Canada. Example, May 1, 2007 (page 48 textbook) Deemed resident full year worldwide income should be taxed in CA Immigrant settled on May 1, 2007 from May 1, 2007, worldwide income should be taxed in CA How to become a non-resident : To become a non-resident for tax purpose, a taxpayer must demonstrate that most ties have been severed: Regularity and length of visits to Canada Residential ties to Canada and other jurisdictions Ownership of a dwelling in Canada on a long-term basis Resident of Spouse, children, and other dependants Origin and background of the individual Memberships to social clubs and churches, banking privileges, car registrations Business or employment ties in Canada; and The general routine of the individual' life Tax liability Individual Corporation Resident Liable for tax on worldwide income Facts indicate the individual is tied to or connected with Canada Facts indicate central management and control is in Canada Deemed resident Liable for tax on worldwide income The individual sojourns in Canada an aggregate of 183 days or more Incorporated in Canada after April 26, 65 Non-resident Liable for tax on Canadian-sourced income Non residential ties to Canada Incorporated abroad and central management and control exist outside Canada Part-year resident Liable for tax on worldwide income while resident Becomes a resident or relinquishes residence during the year...
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