2023-0969261I7 MHRTC - throughout the year

Principal Issues: For an immigrant who comes in on January 1st or an emigrant that leaves on December 31st, are they considered resident throughout the year?

Position: Question of fact.

Reasons: Determination of whether an individual is resident in Canada for tax purposes is a question of fact, and not always determined by the date an individual comes to/departs Canada. The phrase throughout the taxation year means the condition must be met for the entirety of the year, at any time during the year.

Author: Wirag, Eric
Section: 122.92

                                                                               July 11, 2023

    Andre Perrier                                                      HEADQUARTERS
    Legislation Section                                             Income Tax Rulings Directorate
    Individual Returns Directorate                            Eric Wirag, CPA, CMA
    Assessment, Benefit and Service Branch

                                                                                2023-096926

Multigenerational Home Renovation Tax Credit

This is in reply to your question regarding the Multigenerational Home Renovation Tax Credit (MHRTC). More specifically you have asked if an individual who immigrates to Canada on January 1, or emigrates from Canada on December 31 would be considered resident in Canada throughout the taxation year for purposes of the MHRTC.

Our Comments

The MHRTC is a new refundable tax credit that allows eligible individuals to claim certain qualifying expenditures paid for a qualifying renovation. Those renovations must be made to an eligible dwelling that creates a secondary unit within the dwelling that will be occupied by the qualifying individual or a qualifying relation. Up to $50,000 in qualifying expenditures can be claimed for a qualifying renovation, which results in a refundable tax credit of up to $7,500. One of the requirements for an individual to claim the MHRTC is that the individual must be resident in Canada throughout the taxation year in which the claim is made. If the individual is not resident in Canada throughout the taxation year in which the claim is made, the credit available to claim for the individual is nil.  

We have consistently interpreted the phrase “throughout the taxation year” to mean the entire consecutive 12-month period from January 1 to December 31. This would mean an individual would need to be resident in Canada for the entire calendar year in which they intend to make a claim for the MHRTC.

The residence status of an individual is always a question of fact to be determined by taking into account all of the circumstances of the individual. The date upon which a Canadian resident individual leaving Canada will become a non-resident for tax purposes, or the date an individual entering Canada becomes resident in Canada for tax purposes is a question of fact that can only be determined after reviewing all of the relevant facts and circumstances of a particular case.

The most important factor in determining whether an individual entering Canada becomes resident in Canada for tax purposes is whether the individual establishes residential ties with Canada. Where an individual enters Canada and establishes residential ties with Canada, the individual will generally be considered to have become a resident of Canada for tax purposes on the date the individual entered Canada.

Generally, the appropriate date that an individual leaving Canada will become non-resident for tax purposes is the date on which the individual severs all residential ties with Canada which will usually coincide with the latest of the dates on which:

* the individual leaves Canada;

* the individual's spouse or common law partner and/or dependents leave Canada (if applicable); or

* the individual becomes a resident of the country to which he or she is immigrating.

Assuming subsection 250(5) does not apply to deem the person to be non-resident in Canada, where it is determined that an individual establishes residential ties with Canada and is considered resident for tax purposes on January 1 and maintains residency for the entire year, the individual would be eligible to claim the MHRTC, assuming all other requirements for claiming the credit have been met.

Assuming subsection 250(1) does not apply to deem the person to be resident in Canada throughout the year, where it is determined that an individual severs residential ties and is considered non-resident for tax purposes on December 31 the individual would not be considered resident in Canada throughout the tax year and would not be eligible to claim the MHRTC for that year.

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.

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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