In international practice, in order to determine what country a natural person is a resident of, various tests are applied (tie-breaker rules).
- Centre of vital interests test
- Permanent home test
- Habitual abode test
However, life brings about changes, and sometimes new tests appear within the existing ones. We are going to tell you about a curious case which we came across while working on a client’s request.
In 2008, Canadian tax court was adjudicating the application of tie-breaker rules to our former compatriot, who was a tax resident of both the US and Canada. During the proceedings it became clear that the taxpayer has a permanent home in Canada, where his ex-wife, children and his mother reside. It would seem as though the ‘permanent home test’ results are clear, nothing to think about. He is a Canadian resident without a doubt. However, with our Russian creativity it all went a bit wrong.
The man claimed that, in fact, he could stay with his wife and kids or at his friends’ place upon arrival in Canada. That choice, i.e. an opportunity to stay at his home, completely depended on the wife’s mood (sic!), and he has never had the house keys. That is why that home cannot be considered a permanent home.
We must give credit to the tax judge, who kept his wits about him and said something like this:
It does not seem likely that the taxpayer will be turned from the door if he decides to stay at his wife's home. And it is even less likely that the taxpayer's mother will listen to her daughter-in-law, given that the mother is General of the Russian army in retirement!
That’s the ‘daughter-in-law test’! Have a good Friday :-)
You can read the full text of the court decision here.