Can A Canadian “Permanent Traveller” (“PT”) Be A Non-Resident?

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The question of whether or not a person is “resident in Canada” (which includes a person who is “ordinarily resident”) is undoubtedly the most pivotal issue under the Income Tax Act[1].

If the answer is “yes”, the person will generally be subject to Canadian tax on all worldwide income[2]; if the answer is “no”, then only certain, generally Canadian, sources, will be subject to Canadian tax[3].

The determination of residency for Canadian tax purposes is largely based on old UK tax cases that have been adopted and embraced by Canadian courts. By far, the leading Canadian decision in this area is that of the Supreme Court of Canada in Thomson v. M.N.R, 2 DTC 812. In that oft-quoted decision, which is heavily influenced by UK case law, the court indicated that to be “resident” in a place meant to “dwell permanently or for a considerable time, to have one’s settled or usual abode, to live, in or at a particular place”.

In addition, with respect to being “ordinary resident”, the decision contained the following frequently quoted passages:

“one is ‘ordinarily resident’ in the place where in the settled routine of his life he regularly, normally or customarily lives.”.

But what if a Canadian resident leaves Canada and becomes a PT? What if that individual does not “dwell permanently or for a considerable time” in any place after he or she leaves? Can that individual still be considered a non-resident?

Unfortunately, the answer is far from clear, and I know of no reported Canadian tax case that has specifically addressed this issue.

In principle, as long as an individual has adequately severed ties with Canada, he or she should be considered a non-resident, even if that individual does not establish any significant ties to any other jurisdiction.

Even the Canada Revenue Agency (“CRA”) appears to imply that establishing ties to another jurisdiction is not an absolute requirement in order to be a non-resident, given the following statement;[4]

“Where an individual leaves Canada and purports to become a non-resident, but does not establish significant residential ties outside Canada, the individual’s remaining residential ties with Canada, if any, may take on greater significance and the individual may continue to be resident in Canada.”[5]

However, a requirement to establish residence elsewhere, as a prerequisite to ceasing to be Canadian resident, is sometimes taken as being implied in the following passage from Thomson:

“For the purpose of income tax legislation, it must be assumed that every person has at all times a residence.”

This passage, and the inherent assumption it contains, was incorporated in the recent decision of the Tax Court of Canada in Mullen v. The Queen, 2012 DTC 1154[6].

It still remains unclear whether or not obtaining residency elsewhere is a prerequisite to ceasing to be a Canadian resident. It is hard to accept the notion that an individual could leave Canada, never visit, and not have any ties to Canada, yet still be resident here because he has not obtained residency elsewhere,

However, it is certainly the case that an individual will be in a much stronger position in relation to claiming non-resident status if he or she has established residence elsewhere.

In accordance with Circular 230 Disclosure



[1] R.S.C., 1985, c.1 (5th Supp.), as amended “the Act”). All statutory references herein are to the Act.

[2] Subsection 2(1) and 2(2)

[3] Subsection 2(3) and Parts XIII and Part XIV

[4] Paragraph 1.21 of S5-F1-C1

[5] The same statement appeared in paragraph 14 of IT-221R3, which was a predecessor to S5-F1-C1. However, in the previous version, IT- 221R2, the CRA seemed less willing to accept this possibility-paragraph 10 stated “where a resident of Canada goes abroad, but does not establish a permanent residence elsewhere, there is a presumption that he remains resident in Canada.

[6] This decision was upheld by the Federal Court of Appeal (2013 DTC 5087) without any comment or analysis of this specific point.

Mr. Atlas is a Toronto-based Chartered Accountant who practices as an independent consultant on a wide-range of international and domestic tax issues. Most of his practice consists of advising accounting and law firms on high-level tax issues. Prior to forming an independent tax practice in 1991, was Partner in charge of tax practice of major independent accounting firm in Toronto. Advises clients worldwide. Author of leading book, Canadian Taxation of Non-Residents, considered one of the few Canadian tax professionals, outside of the big accounting and law firms, who is an expert on high-level international tax matters.

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