2017 QCCQ 12273, 2017 QCCQ 12273

Chen c. Agence du revenu du Québec 2017 QCCQ 12273 COURT OF QUÉBEC (Small Claims Division) CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-153348-166 DATE: October 10, 2017 ______________________________________________________________________ BEFORE THE HONOURABLE DOMINIQUE GIBBENS, J.C.Q. ______________________________________________________________________ hui ying chen Plaintiff v. agence du revenu du québec Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] By

summary appeal governed by Sections 93.2 to 93.35 of the Tax Administration Act [1] (the “ TAA ”), the Appellant Mrs. Hui Ying Chen seeks the cancellation of 10 tax assessments issued by l’Agence du revenu du Québec (the “ ARQ ”) for taxation years 2005 to 2014 inclusively (the “ Assessments ”). [ 2 ] For these years, the Appellant filed tax returns with the Canada Revenue Agency (the “ CRA ”) as an Ontario resident; no returns were filed in Québec. In 2014, the ARQ conducted an audit into the Appellant’s residency status and determined that she was a Québec resident subject to income tax in Québec.

It issued the Assessments in October 2015. [2] [ 3 ] The Appellant objected to the Assessments, [3] but the ARQ dismissed her objections. [4] [ 4 ] The Assessments total in excess of $37,000, including penalties and interest. [5] At trial, however, the ARQ advised the Court that it was prepared to waive the interest and penalties claimed. FACTuAL CONTEXT [ 5 ] The Appellant immigrated to Québec with her husband and children in May 1977 and settled in Montreal. [ 6 ] In 2004, she began to spend significant periods of time in Toronto, where several members of her family live.

From 2005 to 2014 inclusively, she went back and forth between Montreal and Toronto, spending in total approximately 170 to 180 days per year in Montreal and 190 to 200 days in Toronto. [6] [ 7 ] Despite the time she spent in Toronto, the Appellant’s ties to Québec remained largely unchanged. She kept her rented apartment on Stuart Street until 2013, where she lived when she was in Montreal and which remained unoccupied when she was in Toronto.

The Stuart Street address was her only mailing address and it was also the registered address of Chen Hui Ying Investments inc., an investment company that she formed in 1993 of which she was and remains the sole shareholder and director. [ 8 ] In 2013, she let go of the Stuart Street apartment, but leased a unit in a senior resident home on de Bullion Street.

This became her sole mailing address and the registered address of her investment company. [ 9 ] At least since 2005, the Appellant has continuously held bank accounts in Montréal: a personal account at HSBC Bank Canada and a commercial account for her investment company at Bank of Montréal. She has also been continuously covered by the Québec Medical Insurance Plan. She used her Québec Medicare card to seek medical services over 50 times from 2005 to 2014. [7] [ 10 ] When she is in Toronto, the Appellant lives with her son and his family in a house that he owns.

She does not own or rent property in Ontario, nor is she the holder of bank accounts or credit cards linked to an address in that province. She is not covered by the Ontario Health Insurance Plan (OHIP). [ 11 ] For taxation years 2005 to 2014, the Appellant filed tax return with the CRA as an Ontario resident, indicating her Montreal address as a mailing address and her son’s address in Toronto as her “home address”. [ 12 ] For taxation year 2015, she filed her tax return in Quebec as a Quebec resident.

She explains that she did so because spent more time in Québec than in Ontario that year. [ 13 ] In support of her appeal, the Appellant argues that she was not a Quebec resident during the years at issue. She claims that her true residence is in Toronto where most of her family now lives. She also argues that it was unreasonable for the ARQ to issue the Assessments so long after the taxation years concerned.

questionS in issue [ 14 ] Given these facts and the position of the parties, the Court must address the following questions :

a) Was the Appellant a Québec resident subject to income tax in Québec during the taxation years at issue?

b) Was the ARQ’s right to issue the Assessments prescribed? ANALYSIS

a) Was the Appellant a resident of Québec subject to Québec income tax during the years at issue? - The presumption of validity of tax assessments [ 15 ] Tax assessments issued by the ARQ are deemed valid pursuant to

Section 1014 of the Taxation Act (“ TA ”). [8] [ 16 ] To have an assessment cancelled or varied, a taxpayer must rebut this presumption of validity by making a prima facie case to “demolish” the assumptions upon which the assessment is based. [9] This requires precise and convincing evidence showing the inaccuracy of said assumptions. [10] If the taxpayer makes this prima facie case, the burden of proof shifts to the ARQ, who must prove the assumptions upon which it relies on a balance of probabilities. [11] If the taxpayer cannot make this prima facie case, the impugned assessment stands. - The notion of “resident” under Québec law [ 17 ]

Section 22 TA provides that a person who is a resident in Québec on the last day of a given taxation year must pay income tax in Québec: 22.

Every person who is an individual resident in Québec on the last day of a taxation year or a corporation having an establishment in Québec at any time in a taxation year shall pay a tax on the taxable income of the individual or the corporation, as the case may be, for that taxation year . […] [Emphasis added] [ 18 ] The term “resident” is not defined in the TA or the TAA , but our Courts have identified certain factors to consider to determine whether a person is a resident of a given jurisdiction for fiscal purposes. [ 19 ] In Thomson v.

Minister of National Revenue , [12] the Supreme Court of Canada established certain underlying principles to keep in mind on the issue :

a) Fiscal residence is a pure question of fact and depends on the circumstances of each case;

b) One must look at the customary or ordinary mode of life of an individual, as opposed to special or occasional residence;

c) Every person has, at all times, a fiscal residence somewhere;

d) A person may, simultaneously, be a resident in more than one jurisdiction. [ 20 ] In The Queen v. Reeder [13] , the Federal Court of Canada stated the following regarding the material factors to consider to determine the residence of a taxpayer: “(…) While the list does not purport to be exhaustive, material factors include: a. past and present habits of life; b. regularity and length of visits in the jurisdiction asserting residence; c. ties within that jurisdiction; d. ties elsewhere; e. permanence or otherwise of purposes of stay abroad.

The matter of ties within the jurisdiction asserting residence and elsewhere runs the gamut of an individual's connections and commitments: property and investment, employment, family, business, cultural and social are examples, again not purporting to be exhaustive. Not all factors will necessarily be material to every case.

They must be considered in the light of the basic premises that everyone must have a fiscal residence somewhere and that it is quite possible for an individual to be simultaneously resident in more than one place for tax purposes. » [14] [ 21 ] The principles set out in Thomson and Reeder have been reiterated many times by Québec Courts in the context of Québec fiscal laws. [15] They have also been incorporated into an interpretative bulletin of the ARQ. [16] - The Appellant’s situation [ 22 ] On the basis on the Appellant’s ties within Québec, the ARQ concluded that the Appellant remained a Québec resident from 2005 to 2014 despite the time spent in Ontario.

[ 23 ] The Appellant argues, on the other hand, that she was an Ontario resident because :

a) She considers her home to be with her son in Toronto, where she spent between 190 and 200 days a year;

b) Most of her family is in Toronto;

c) The only reason she has maintained ties within Québec is because of her investment company;

d) She filed tax returns as an Ontario resident and the ARC considered her to be an Ontario resident. [ 24 ] The Court disagrees with the Appellant. In light of the key factors to be considered to determine residency within the meaning of fiscal laws, the Appellant has remained a resident of Québec. [ 25 ] Clearly, the Appellant modified her habits of life in 2004 when she started to spend significant time in Toronto. On the facts, however, she did not sever her residential ties within Québec, which remained very significant throughout the period at issue.

She kept leased living quarters in Montreal, which were available to her exclusively, throughout the period (the Stuart Street apartment until 2013 and the senior resident home unit afterwards); her only bank accounts are in Montreal; her investment company is registered in Québec and she admittedly meets with her investment broker, accountant and clients in Montreal; her Montreal address is her sole mailing address for all intents and purposes, including the issuance of tax slips (ARC and Revenu Québec); and she is active with her religious community in Montreal.

In addition, she kept her Medicare card and used it more than 50 times to receive medical services in Québec during the period. [ 26 ] By comparison, her only proven ties within Ontario are the presence of her family and the fact that she lives with her son in his home when she is in Toronto. [ 27 ] The importance of her ties within Québec, most of which are unrelated to any business activities (e.g. living arrangements, involvement in religious activities, receiving medical care under the Québec Medical Insurance Plan, etc.), are irreconcilable with the Appellant’s contention that she stopped being a Québec resident. [ 28 ] The regularity and length of the Appellant’s stays in Ontario do not convince the Court otherwise, given the importance of the ties she maintained in Québec. [ 29 ] As for the fact that the ARC considered her to be an Ontario resident, the evidence shows that there was no audit regarding her residency status and that the ARC merely accepted her representation that she was a resident of Ontario. [ 30 ] All in all, the Appellant has not shown that the assumptions upon which the Assessments are based are inaccurate.

On the contrary, the Court finds on the facts that the Appellant was residing in Québec for the taxation years at issue. [ 31 ] As suggested by the ARQ’s representative at trial, the Appellant remains free to seek from the ARC a modification to her residency status for the years concerned and she may be able to recover all or part of the income tax paid as an Ontario resident.

e) Was the ARQ’s right to issue the Assessments prescribed? [ 32 ] The Appellant argues that the ARQ should be precluded from issuing assessments after so many years. This calls upon the principles relating to prescription. [ 33 ] Pursuant to

Section 95.1 TAA , an assessment may be issued against a person subject to Québec income tax even in the absence of a tax return.

If a taxpayer fails to file a tax return, the Minister may determine the tax, interest and penalties payable “ at any time ”. [17] [ 34 ] This is different from a “ reassessment ” or “ additional assessment ”, which must be issued within three years after the original assessment or the day on which a fiscal return for the taxation year is filed, whichever is later. [18] [ 35 ] In other words, if a taxpayer fails to file a tax return as required by law, [19] the prescription period imposed on the Minister to issue an assessment is suspended. [20] [ 36 ] In the instant case, the Appellant did not file tax returns in Québec for the taxation years concerned and the Assessments were original assessments and not “ reassessments ” or “ additional assessments ”.

The ARQ could therefore invoke the Minister’s right to issue the Assessments “ at any time ” as provided for in

Section 95.1 TAA . [ 37 ] The ARQ’s right to issue the Assessments was therefore not prescribed. [ 38 ] Given the above, the Appellant’s appeal must be dismissed. [ 39 ] However, given that the ARQ has waived the interest and penalties claimed in the Assessments and as suggested by the ARQ, the Court will defer to it the task of modifying said Assessments in order to reflect this waiver. FOR THESE REASONS, THE COURT: DISMISSES the appeal; DEFERS to the ARQ the task of varying the following assessments in order to remove the interest and penalties claimed therein:

Notice of Assessment Date Issued Taxation Year QA238100 E00 October 5, 2015 2005 QA238101 E00 October 5, 2015 2006 QA238102 E00 October 5, 2015 2007 QA238103 E00 October 5, 2015 2008 QA238104 E00 October 5, 2015 2009 Q0356451 E00 October 2, 2015 2010 Q0356454 E00 October 2, 2015 2011 Q0356457 E00 October 2, 2015 2012 Q0356462 E00 October 2, 2015 2013 Q0356465 E00 October 2, 2015 2014 THE WHOLE, WITHOUT LEGAL COSTS . __________________________________ DOMINIQUE GIBBENS, J.C.Q. Date of hearing: September 25, 2017