doing business in canada - Davies Ward Phillips & Vineberg LLP

• real property situated in Canada;• assets used in a business carried on in Canada;• a share of a private corporation, an interest in a trust or an interest in a partnership more than 50% ofthe value of which was derived from real or immovable property situated in Canada, Canadian resourceproperty, or timber resource property at any time in the 60 month period prior to the disposition ofsuch shares or other interests; and• units of a mutual fund trust and listed shares of a corporation, where at any time during the 60-monthperiod preceding the disposition, a 25% ownership threshold is exceeded and more than 50% of thevalue of the units or shares was derived from real or immovable property situated in Canada, Canadianresource property, or timber resource property.Prior to March 4, 2010, the definition of taxable Canadian property included all shares of a private Canadiancorporation, regardless of the nature of the corporation's assets. The Government of Québec, which is the onlyCanadian province with similar rules, announced its intention to harmonize the definition of taxable Québecproperty accordingly.DETERMINATION OF CANADIAN RESIDENCEThe term "resident in Canada" is not defined in the Tax Act but instead a person's residence is determined bycommon law criteria. However, there are some specific deeming rules in the Tax Act that deem certain personsto be either resident or not resident in Canada for purposes of the Tax Act.A corporation incorporated in Canada after April 26, 1965 (or, in certain limited situations, before this date) isdeemed to be resident in Canada.There is no statutory rule that deems a corporation incorporated outside Canada to be resident in Canada.Under the common law test of residence, a corporation will be considered to be resident in Canada if its centralmanagement and control is located in Canada. Central management and control is generally considered to referto the superior or directing decision-making in respect of a corporation that is normally exercised by its board ofdirectors. As a result, the place where the board of directors exercises its decision-making powers will generallybe the place in which the central management and control of the corporation is located.In the case of an individual, the courts have generally held that residence is determined on the basis of thedegree to which an individual "settles into or maintains" his or her ordinary mode of living at the place inquestion. In addition, an individual will be regarded as establishing Canadian residency if he or she is ordinarilyresident in Canada. The determination of whether an individual is ordinarily resident in Canada depends onwhether Canada is the place where the individual, in the settled routine of his or her life, regularly, normally orcustomarily lives. In addition, the Tax Act deems an individual who "sojourns" in Canada for 183 or more daysduring a year to be resident in Canada throughout that year.In general, a trust will be resident in Canada for income tax purposes where a majority of its trustees areresident in Canada. However, a careful examination of the facts of each situation, as well as a review of recentjurisprudence, is necessary to help determine the residency of a trust. In addition, certain non-resident trustswill be deemed to be resident in Canada in certain circumstances.A taxpayer who is considered under Canadian domestic law to be resident in Canada and at the same timeresident in another country may be deemed by an applicable tax treaty to be resident in only one country for taxpurposes.Tax Considerations 81