p>Earlier this year, in Black v. HMQ (2014 TCC 12), Lord
Conrad Black unsuccessfully argued in the Tax Court of Canada
that, due to his U.K. residency status, he should not be subject to
Canadian tax on certain income and taxable benefits (see our
In the case, the Tax Court held that a liberal and purposive
approach must be adopted when interpreting tax treaties
(i.e., Canada-United Kingdom Income Tax
Convention). Applying this approach, the Tax Court held that
Lord Black could be deemed a U.K. resident for the purposes of the
Canada-UK Treaty and also a Canadian resident for
the purposes of the Income Tax Act (Canada) (the
Further, the Tax Court held that Article 27(2) of the
Canada-UK Treaty applied to enable the CRA to assess a
Canadian resident's non-Canadian office and employment income.
Consequently, the Tax Court held that Lord Black was liable for tax
on the income and benefits in question.
Both parties had agreed that subsection 250(5) of the
Act, the tie-breaker rule which deals with the deemed
non-residency of a Canadian where the individual is deemed to be a
resident in another country by virtue of a tax treaty, did not
apply. At the time the subsection came into force in 1999, the
provision was not applicable to a Canadian resident individual who
was (i) a resident of two countries and (ii) deemed resident of one
of those countries under a tax treaty. Had subsection 250(5)
applied, Lord Black would not be a resident of Canada for the
purposes of the Act.
On appeal, the Federal Court of Appeal considered the
(a) whether the Tax Court correctly
determined that Lord Black could be deemed both a U.K. resident
under the Canada-UK Treaty and a Canadian resident for the
purposes of the Act; and
(b) whether the Tax Court correctly
determined that Article 27(2) of the Canada-UK Treaty
The Court of Appeal dismissed the taxpayer's appeal and
affirmed the Tax Court's decision on both issues (2014 FCA 275).
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