Tax Measures Under Canada’s COVID-19 Economic Response Plan

  • Individual tax residency: In general, an individual’s residence for Canadian tax purposes is a question of fact decided according to common law criteria, which are based on the individual’s ties to Canada. In addition, an individual who is physically present in Canada for a period or periods totaling 183 days or more in a taxation year is deemed to be resident in Canada all year round. Where a non-resident cannot return to their country of tax residence due to travel restrictions, CRA’s position is that this factor alone will not result in the individual being resident in Canada for Canadian tax purposes.
  • Corporate tax residency: Under the Canadian tax system, companies that were incorporated under foreign laws can be considered resident in Canada if their “central management and control” is located in Canada. Certain tax treaties decide the issue of dual residence, taking particular account of the place where the company’s affairs are actually managed. If directors of companies subject to such tax treaties are present in Canada due to travel restrictions and must attend board meetings in Canada because of these restrictions, the CRA will not consider this reason alone to be sufficient for the corporation to be considered resident in Canada. Determinations of corporate residency involving potential dual residency with non-treaty countries will be determined on a case-by-case basis.

This administrative approach will also be followed in respect of other entities established in foreign jurisdictions that are considered corporations under Canadian income tax law, such as limited liability companies.

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