Sunday, April 3, 2011

Canada's treaties - Article 4 Residence of Individuals

The big issue in treaties is where the taxpayer will pay tax. Often it comes down to where you are resident. Article 4 determines where you will be considered resident under the treaty.

The first part is usually to look at whether the person is resident in that country for purposes of it's tax if there was not treaty. Often that results in you being resident in both countries. All treaties have tie-breaker rules when this happens.

The tie-breaker rules for individuals can be fairly standard, but can be multi-step. The treaty with Australia is an example of only two steps. First you go with the country where you have a permanent home. If you don't have a permanent home, or have two, then you look at the personal and economic relations.

The treaty with Austria continues those two steps in the event of further ties by following with habitual abode and then nationality. Like many treaties, Austria's treaty with Canada indicates that if the matter is not settled in the content of the treaty, the Competent Authorities will have to decide.

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