whether CRA is devoting greater resources to reviews of provincial residency

An August 31, 2018 Supreme Court of British Columbia case (Sampson vs. British Columbia, 2018 BCSC 1503) reviewed whether the taxpayer was a resident of Alberta (as he had claimed) or of B.C. (as CRA had assessed) for the 2009 through 2012 taxation years. CRA had previously reviewed his residency for 2000 through 2002, ultimately accepting his Alberta residency. That review was described as having a limited scope compared to the more comprehensive audit undertaken by CRA in respect of the years under appeal.

location of employment is not determinative of residency

Taxpayer loses
After an extensive review of the taxpayer’s personal and work history, and weekly routine, the Court concluded that the taxpayer was a resident of both provinces. This required a determination of his principal place of residence.

The Court held that the taxpayer worked in Alberta but principally lived and resided in B.C. As a consequence, he was subject to B.C. income tax, as that was his principal place of residence.

The facts noted by the Court in reaching these conclusions included the following:

the many possible residential ties

• he rented a 600 square foot apartment in Alberta, while his wife owned a 10,000 square foot house in B.C.;
• he owned, and spent considerable time on, a yacht registered in Alberta and moored in B.C.;
• he worked in Alberta, generally returning to B.C. on weekends, while his wife and children occasionally visited him in Alberta;
• in the four years under review, he divided his time between Alberta (27.86% of days and 18.62% of nights), B.C. (42.84% of days and 55.44% of nights), and travel outside Canada for business (21.09% of days and 17.73% of nights), and pleasure (8.21% of days and nights);
• he had limited personal effects in Alberta and many more in B.C.;
• his driver’s license and provincial health care were in Alberta;
•  he voted in Alberta and not in B.C.; and
• his social life in Alberta was limited and much more vibrant in B.C.

The Court noted that it could not accept the assertion that the tax load did not influence the taxpayer’s residency claim nor that the B.C. house was beneficially owned only by his wife.

Editors’ Comment
While the exact timing of a residency change was not an issue in this case, it should be remembered that an individual is taxable on most forms of income in their province of residence on December 31 of the year in question. The sole exception is business income, which is allocated between jurisdictions where a permanent establishment exists. CRA Folio S5-F1-C1, Determining an Individual’s Residency Status, discusses residency from an international perspective but also notes that similar considerations apply in determining provincial residency.