In Canada, both the federal and provincial governments levy income taxes on Canadian residents. In most provinces, taxpayers fill out a tax return for both federal and provincial income taxes. In British Columbia, the federal government collects the tax, and remits the province’s portion to the Government of British Columbia.
The rule in British Columbia is that you pay British Columbia income tax if you were resident in British Columbia “on the last day of the taxation year.” It is not simply a question of whether you were physically in the province on that day, but whether you were a resident.
What if you are a resident of two provinces? Fortunately, you do not have to pay provincial income tax twice, but sometimes it is hard to determine which provincial income tax applies. This question can have an effect on how much tax the taxpayer must pay. Some provinces, particularly Alberta, have relatively lower tax rates than others.
This is what happened in a recent case, Mandrusiak v. Canada (National Revenue), 2007 BCSC 1418.
Mr. Mandrusiak was born and raised in Alberta. He raised a family in Alberta. He owned a farm and a house in Alberta.
In 1987, the company he worked for asked him to relocate to its office in Vancouver. He and his wife bought a house in Vancouver, intending to live and work in Vancouver for two or three years. They kept their house and farm in Alberta.
Mr. Mandrusiak worked longer in Vancouver than he anticipated. He continued to work as an employee in Vancouver until 1997. After that he continued consulting in British Columbia.
During the years 2000 through 2002, Mr. Mandrusiak lived in both British Columbia and Alberta. He registered his cars in Alberta, and had an Alberta driver's licence. On the other hand, he had a British Columbia medical card. He spent slightly more time in British Columbia than in Alberta during those years. But, his wife spent slightly more time in Alberta.
The Province of British Columbia took the position that Mr. Mandrusiak was obligated to pay British Columbia tax for the years 2000, 2001, and 2002. Mr. Mandrusiak argued that he was principally resident in Alberta.
Mr. Justice Sigurdson held that Mr. Mandrusiak was a resident of both Alberta and British Columbia, but his principal residence during those years was Alberta. The deciding factor in this case was that Mr. Mandrusiak’s extended family resided in Alberta, and he had stronger social ties to Alberta. Accordingly, Mr. Mandrusiak will pay Alberta income tax, rather than British Columbia income tax for 2000 through 2002.
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