Question

Wolfhowl Ltd. was incorporated in Banff, Alberta in 1961. Despite its Canadian charter, the Company has never carried on business in Canada. However, until 1971, all meetings of the Board of Directors were held in Banff. Since 1971, all board of directors’ meetings have been held in Wyoming. Determine the residency status of Wolfhowl Ltd.

Answer 1

Solution -

Wolfhowl Ltd was incorporated in Canada and they continued to have all meetings of their board of directors in Canada till 1971. Even though they did not carry any commercial activities in Canada they would still be considered as a Canadian Company as per the Income Tax Act and Common Law which presumes that their place of management and control was in Canada.

Since 1971, all board of director meeting have been held in Wyoming which is in United State of America. There is a tax treaty between Canada and America and even though the company was incorporated in Canada and now all their management and control is happening from United States of America as per the definition from the Common Law the company cannot be considered to have the residency of Canada. The tax treaty between Canada and America defines such companies as Resident Aliens and they are taxed in the United States. Hence since 1971 the company is considered non-resident in Canada.

Reference - Canada Income Tax Act Subsection 250(4) and 250(5)