2019-0834041I7 Disability Tax Credit and non-resident individual

Principal Issues: Whether a non-resident individual is eligible to claim the Disability Tax Credit and transfer the unused credit to their Canadian resident spouse.

Position: No.

Reasons: A non-resident individual that does not have any Canadian source income would not be considered a “taxpayer” as it is defined in the Act and therefore would not be eligible for the Disability Tax Credit. Consequently, there would be no amount available for transfer to the Canadian resident spouse under section 118.8 of the Act.

Author: Brennan, Christopher
Section: 118.3(1), 118.8

                                                                                April 14, 2020

Kelly Mahaney                                                        HEADQUARTERS
Federal Partnerships and Legislation Section        Income Tax Rulings
Benefit Programs Directorate                                  Directorate
Assessment and Benefit Services Branch               Chris Brennan
                                                                                 (613) 822-6323                            

                                                                                 2019-083404

Disability Tax Credit and non-resident individual

This is in reply to your email of December 5, 2019 requesting our view on whether a non-resident individual is eligible to claim the Disability Tax Credit (DTC) and transfer the unused credit to their Canadian resident spouse. Your email provides the following background information:

*     The Canadian resident has a spouse who is a non-resident individual living in XXXXXXXXXX.

*     The non-resident individual has never resided in Canada nor visited Canada.

*     The Canadian resident claimed the spousal credit for the non-resident individual in XXXXXXXXXX.

*     The Canadian resident claims to be sending financial support to the non-resident spouse.

*     The Canadian resident has claimed the transfer of the DTC from the non-resident individual pursuant to section 118.8 Income Tax Act (“Act”).

Based on this information we have assumed that the non-resident spouse has no Canadian source income.

The DTC is a non-refundable tax credit that provides tax relief for individuals who have a severe and prolonged impairment in physical or mental functions by providing a credit in computing an individuals tax payable under Part I of the Act for a taxation year.  Based on the line of reasoning in Oceanspan Carriers Limited v. The Queen 87 DTC 5102, it is our view that an individual who is not resident in Canada and who has no Canadian source income would not be entitled to the DTC.  The individual is not liable to pay tax in Canada, and therefore has no need to utilize the provisions permitting the DTC.  In the case you have outlined above, the non-resident individual would not be entitled to the DTC, consequently, there would be no amount available for transfer to the Canadian resident spouse under section 118.8 of the Act.

We trust these comments will be of assistance to you.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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