Bower v. R: Tax Court Rejects Taxpayer’s Claim to be a Resident of Canada Notwithstanding Substantial Connecting Factors

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Bower v. The Queen[1] is an unusual case in that the taxpayer was asserting that he was a resident of Canada while the Crown contended that he was not.  Mr. Bower represented himself at trial.

Mr. Bower was born in Canada but since June of 2007 spent most of his time in Indonesia where he lived with a woman in a common law relationship and stood in loco parentis to her daughter.  He claimed Canadian Child Tax Benefits (“CCTBs”) from May 2009 to November 2010 and the Goods and Services Tax Credits (“GSTCs”) for the period of July 2009 to April 2011.  The Minister disallowed these claims on the basis that Mr. Bower was not a resident of Canada during the relevant periods.

The statutory test under the Income Tax Act[2] was that of “eligible individual” found in subsection 122.5(1) provides that:

[…] a person is not an eligible individual, […] if the person […]

(c) is at the beginning of the specified month a non-resident person, […]

The facts were summarized by the trial judge as follows:

[4]            On average the Appellant has visited Canada not more than four times since 2007. He has done so each time for a period of between six to eight weeks.

[5]            Mr. Bower is seized of a life estate, shared with his sister in a family home located in Nova Scotia, where Mr. Bower’s brother is the holder in fee simple of the remainder interest. Mr. Bower generally stays at the house for several weeks during his travels to Canada.

[6]            As to investments, Mr. Bower maintains a trading account at TD Waterhouse, a bank account at Royal Bank, a bank account at the Estonian Credit Union and an accidental death and extended health coverage policy. All of these investments are domiciled in Canada. The bank accounts do not have large cash balances and have been maintained at least partially to assist with Mr. Bower’s daily living in Indonesia to the extent that monthly pension benefits, credit card payments and any loan payments are processed through these accounts.

[7]            The Appellant has three children and several grandchildren in Canada. He has visited them during his travels to Canada during the relevant period. His children and grandchildren are not dependents. Certain larger possessions of Mr. Bower, owned prior to 2007, remain in Canada either in Nova Scotia or with his grown children.

[8]            Mr. Bower admitted that all the accoutrements for daily life exist for him in Indonesia. He testified that he maintains an intention to return to Canada, but that would likely be precipitated by his sickness or the breakdown of his spousal relationship both of which events he admitted he wishes to avoid.

The court rejected Mr. Bower’s claim that he continued to be a resident of Canada during the relevant periods:

[14]        While his visits to Canada are almost annual, they bear the hallmarks of a vacation or holiday as to their length, season and purpose. His sustained and active membership in Rotary International in Indonesia when compared with his membership card status within certain groups in Canada also bears witness to a clear difference in the intensity of attachment as between the two countries.

[15]        Mr. Bower’s ties to Indonesia are by this own choice, whereas his familial ties to Canada are not. His choice of maintaining bank accounts and credit cards domiciled in Canada are, by his own admission, for the purposes of assisting him with daily living in Indonesia where, again by his testimony, the banking system leaves something to be desired at least to the extent of middle aged foreigners attempting to use that banking system.

[16]        Mr. Bower’s ties and nexus to Indonesia are not to be underestimated in light of his present family, economic and social interaction and obligations there. Furthermore, the evidence of Mr. Bower’s spouse’s discontinuance of previous applications for entry into Canada, the undesirable circumstance (either ill health or spousal separation) which may give rise to a renewed intention to return to Canada and Mr. Bower’s lack of comparatively important economic, commercial or social ties to Canada leave the Court with no other conclusion other than Mr. Bower’s “fiscal residence” is more factually and substantially situate in Indonesia rather than in Canada.”

It would be helpful if this case were reviewed by the Federal Court of Appeal.  There is little doubt that if Mr. Bower were a wealthy man CRA could have vigorously argued that he never fully severed his residential connections with Canada. At the very least, CRA could have argued that he had a dual residence in Canada and Indonesia.  The decision makes no reference to the possibility of dual residence or the possible impact, if any, of the Canada-Indonesia Income Tax Convention, as signed on January 16, 1979 and modified by a Protocol signed on April 1, 1998.

In relatively complex areas like this, cases involving self-represented taxpayers often end up with unsatisfactory results.

[1] 2013 TCC 183.

[2] R.S.C. 1985, c 1. (5th Supp.), as amended (the “Act”).