Question

In: Accounting

Select the false statement: A. Part-year residency is the year in which residency status changes. B....

Select the false statement:

  • A. Part-year residency is the year in which residency status changes.
  • B. For a part-year resident: for the period of residency, the individual pays tax in Canada on worldwide income. For the period of non-residency, the individual pays tax in Canada on income earned in Canada from employment, carrying on business, and from disposal of taxable Canadian property
  • C. A permanent establishment is a “fixed place of business through which the business of a resident of a country is wholly or partly carried on”. It can include a branch or a person who habitually exercises an authority to conclude/negotiate contracts.
  • D. Facilities used solely for storage, display, or delivery of goods typically do not meet the definition of a permanent establishment
  • E. An individual must always be a resident in at least one country at any given time
  • F. A clean break is considered on the latest date of when: the individual leaves Canada, the individual’s immediate family leaves Canada, or the individual loses citizenship in Canada

Solutions

Expert Solution

F) is False statement
Because
An arrangement of a couple's finances that allows the parties to separate without any further financial responsibility for each other.this is called Clean break(complete separation from something). The court has a statutory duty to consider if a clean break is appropriate under section 25A of the Matrimonial Causes Act 1973.

So

The individual leaves Canada,

The individual’s immediate family leaves Canada, or

The individual loses citizenship in Canada.

Is not consider as Clean Break.

Following Statements are true:


A) True,

Because
A part year resident is an individual who was a resident of a particular state for only part of the tax year*. This includes:

Anyone who moved into a state with the intention of making their home there, or

A resident of a state who moved out of their original state with the intention of making their home elsewhere any time during the income tax year.

B) True,

Because
Your status as a tax resident determines the extent to which Canada may tax your income. Canada taxes its residents on their worldwide income. Canada taxes a non-resident’s Canadian-sourced income. In particular, Canada taxes a non-resident’s income from: (1) employment in Canada; (2) carrying on a business in Canada; or (3) disposing of a taxable Canadian property.
Notably, tax residence is unrelated to residence for immigration purposes. You can be a Canadian tax resident even if you aren’t a Canadian permanent resident or citizen. Similarly, you can be a Canadian citizen or permanent resident yet fail to be a Canadian tax resident.

C) True,

Because
The term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on”. Taken together with the commentary to this article
Article 5(5) provides that a “dependent agent” can constitute a PE if they habitually exercise their authority to enter into contracts in the name of the enterprise.
Under BEPS Action 7, this definition has been extended to include not just someone who signs the contracts on behalf of the enterprise, but also to someone who habitually plays the ‘principal role’ in the formation of contracts, that are then formally concluded by the enterprise.

D) True,

Because
Even if an enterprise would otherwise meet the definition of a PE, certain activities are ‘exempted’ from the application of the PE rules. Under Article 5(4), if the location would be a PE, but it is used solely for an activity which has for the enterprise an “incidental, preparatory or ancillary” character, it is deemed not to be a permanent establishment. This includes:

The use of a storage facility solely for the delivery of goods to customers;

The maintenance of a stock of goods owned by the enterprise, held solely for processing by another enterprise;

The maintenance of a fixed place of business solely for the purpose of purchasing goods, or merchandise, or of collection of information for the enterprise;

Any other activity of an incidental, preparatory, or ancillary nature.

E) True,

Because
Residency is the act of establishing or maintaining a residence in a given place. Residency is a concept which heavily affects the legal rights and responsibilities that are available to a person, including eligibility to vote, eligibility to stand for political office, eligi bility to access government services, responsibility to pay taxes, and on and so forth.
So an individual must be resident in at least one country at the given time.


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