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Temporary Forced Family Repatriation
Canadian Tax Implications For Assignees and Companies Sending Employees Outside Canada


The international work place is becoming increasingly risky in some countries. As a result, it occasionally becomes necessary for safety reasons to temporarily relocate an assignee’s family or the assignees themselves out of harm’s way. Many assignees have significant and valid concerns regarding the effect this will have on their Canadian income tax status. They may have taken the assignment and agreed to the compensation package offered by the employer under the assumption that they would be non-residents of Canada and thus not liable to Canadian income tax on their employment income.

For the purposes of this article, it is assumed that the assignee and his or her family are non-residents of Canada at the time of the temporary forced family repatriation. The major potential pitfall of the family returning home is the risk of the assignee being deemed a tax resident of Canada and being required to pay full Canadian tax on his or her world wide income. An assignee who has not ceased to be a Canadian resident, perhaps because the assignment was only intended to last for nine months, will already normally be paying full Canadian tax, so it will not matter from a tax standpoint if the family members remain with the assignee on assignment or return home to Canada and wait until the security status at the assignment location has improved.

This article does not therefore apply to those individuals who are resident of Canada for income tax purposes.

Temporary Forced Family Repatriation:

Acronyms are very much a part of our lives. We use them everyday, often sub-consciously. We at CompassTAX, have added to the global pool of acronyms. We are not overly proud of this achievement, but wanted to develop a term that describes an issue that is currently causing concern to assigned employees and their Canadian employers.

Temporary Forced Family Repatriation (“TFFR”) describes a situation where the family of an assignee is required by company policy to return to Canada for one of a number of reasons while the assignee remains on the job.

The repatriation should generally be temporary and forced on the family against their wishes. Repatriation to third countries (excluding Canada) do not give rise to the potential problems as outlined in this article.

There are many reasons why family members may be required to return to Canada temporarily by the company. These may arise from:

  • Natural disasters
  • Wars, civil unrest, riots
  • Terrorist threats, and
  • Medical concerns – SARS, the West Nile virus, etc.

Any of these types of situations could necessitate family members being evacuated temporarily while the danger is especially high. Recently, security levels in some areas of the world such as the Middle East, have increased in intensity. Many of our clients now regularly check for travel advisories.

Registration of Canadian Abroad (“ ROCA”)

Canadian companies assigning employees to countries with potential for problems, may wish to implement a mandatory relocation policy requiring the assignee to register with the nearest Canadian embassy. The local Embassy will directly notify Canadians in-country and offer urgent advice. This service is also helpful in the event of a family emergency at home in Canada. Information about ROCA can be found at a and information given is governed by the provisions of the Privacy Act.

Tax Residency

TFFR can cause an assignee to be deemed a resident of Canada even if the assignee does not return to Canada at any point. This is due to the fact that the spouse, who has returned to Canada, becomes a resident for tax purposes by virtue of being in Canada and re-establishing primary tax residency ties to Canada. The CRA generally considers a married or common law couple to have the same residency status even if the two people are living apart temporarily.

When is a spouse, considered to have re-established a significant number of primary residency ties, to cause a problem? There is no easy answer to this question. Primary residential ties are not defined in the Income Tax Act ( Canada). The CRA has an administrative position regarding residency that is outlined in Interpretation Bulletin #221 “Determination of an Individual's Residence Status”.

Once the spouse starts to re-establish residency ties, such as moving back into the family home, which may have been rented out while abroad, enrolling the children in school, taking a job in Canada, renewing memberships, drivers licenses and other secondary ties to Canada, it becomes difficult to argue that the spouse, and therefore the assignee are non-residents of Canada.

Designing a Company Policy regarding TFFR

Ideally, the spouse and family are not in Canada for more than a few weeks, which can be considered normal vacation time and would not result in a change in residency status. However, it is possible that the assignee’s family may be facing a longer term forced repatriation and that the CRA would normally consider the assignee’s spouse to be resident as a result of an extended return to Canada.

The company should have a written policy in place outlining what will happen from a compensation and tax standpoint should an assignee lose his non-resident status part way through the assignment due to a forced repatriation. It is a good idea to spend the time before a crisis occurs to think the matter through and draft a well thought out, comprehensive policy.

There are a few important issues to consider in drafting the policy if the company does not already have a policy that deals directly with TFFR. The first issue is where is the family going to stay while they are away from the assignee. This is an important consideration because it can determine whether the assignee is at risk for the CRA to be declared a tax resident of Canada because the spouse has returned to Canada.

Location of Spouse and Family during TFFR

Some companies will put up the spouse and family in rental accommodation for the duration of the crisis, with all or some expenses paid. This is not a problem from a tax standpoint if the stay in Canada is for a relatively short duration. In our practice, we have found that the CRA considers anything up to about six months to be acceptable in the case of a forced repatriation, as long as the spouse does not establish major residential ties, such as starting a job in Canada while waiting to go back abroad.

If the company does not pay for accommodation and the spouse and family return home to their family home for the duration of the crisis, it is much harder to argue that the spouse has not re-established residential ties with Canada. This will result in the assignee, and possibly the company, if the assignee is covered under a tax equalization program, becoming liable for taxes on the assignee’s earnings while the assignee is on assignment. If the assignee has been non-resident before the crisis occurs, then the CRA could consider the assignee and spouse resident as of the date the spouse and family arrive back in Canada. This means that Canada will only require tax on the income earned during the period of the crisis since the family will likely cease Canadian residency once the family returns overseas, assuming that the assignment will continue for a significant period.

If the assignee has been non-resident for less than a year, the CRA may deem the assignee to have not ceased residency in the first place and thus be liable for tax on employment income from the beginning of the assignment. The CRA has removed the two year absence rule from its administrative policy regarding non-residents and instead considers the intentions of the assignee at the date of departure. If the assignee clearly severed as many residential ties as possible then it is possible to be non-resident for shorter periods of time if the reason for the return is beyond the taxpayer’s control. The types of circumstances that would result in a forced family repatriation would clearly be beyond their control, thus supporting a case that the taxpayer at the very least should be non-resident up to the point the family was forced to return.

If the expected stay is likely to be several months or more, the company may wish to consider repatriating the family members to another safer third country. The spouse and family are likely to be treated as vacationing non-residents and would not cause the assignee to become resident of that country for tax purposes.

Designating a Tax Services Provider

Determinations of tax residency status are very subjective and many factors are involved. The dollar figures involved, should the CRA determine that the assignee and spouse are residents of Canada, are not insignificant.

As a result, it is important that professional advice be sought to handle the interactions with the CRA if there is any risk of the assignees being deemed residents of Canada. We specialize in international tax issues and would be glad to be of assistance if you have questions on this or any other international tax matter.

Who is going to pay any tax

In the best case scenario of course, the assignee will avoid being declared a tax resident of Canada and there will be no additional tax to pay. However, the worst case scenario should be considered and a policy implemented to deal with it. This can range from the assignee being responsible for paying all tax himself to the company paying all tax on the assignee’s behalf.

Form NR73 Determination of Residency Status (Leaving Canada)

If the assignee has obtained formal approval of non-resident status as a result of filing an NR73 form, the assignee may be required to inform the CRA of any significant or material change in circumstances. A spouse and children returning to Canada, even temporarily, would qualify as a significant change in status. By informing the CRA of the change in status, the tax service provider may request favorable treatment based on the temporary nature of the return to Canada.

CRA Response to TFFR

We recently requested a ruling on the subject of TFFR from the International Tax Directorate at the CRA. In this particular case, the CRA indicated that, provided significant residency ties to Canada were not re-established, the spouse and family members could remain in Canada for up to six months without a change in the income tax status of the assignee. If there were additional circumstances that necessitated the family being in Canada for longer than six months, the CCRA indicated that they should be contacted. In this case, the families did not move into the former family homes, which continued to be rented.

It should be noted that this was a response to a specific enquiry and may not be applicable to all situations. However, it appears that under some circumstances, the CRA will allow the assignee to maintain non-resident status when it normally would be revoked. International assignment program managers should keep in mind that such opinions are not binding, but could provide strong support for a notice of objection if the assignee is assessed unfavorably.

Kadrie V. The Queen

The Kadrie vs. The Queen case might also provide additional support, should the CCRA declare the assignee to be taxable by Canada due to TFFR. In this particular case, Mr. Kadrie’s spouse was unable to return to Kuwait for immigration reasons after the Gulf War and the court held that, despite substantial investments in Canada and other ties to Canada, Mr. Kadrie should be considered non-resident, even though his spouse and family lived in Canada.

In Conclusion

With personal safety issues in a growing list of countries, two-income families, elder-care, children’s education etc. it is becoming more difficult for Canadian employers to convince employees to accept an international assignment. As the issues surrounding TFFR demonstrate, the case for clear and equitable assignment tax policies has never been more important.


By Peter J. Simpson, CA and Cindy Jay, CA Manager, Assignment Tax Programs Group at CompassTAX ™ in Calgary, Alberta.

CompassTax™ assists Canadian companies and their expatriate employees with taxation issues that arise as a result of global assignments. CompassTax works with Canadian companies to design and implement assignment tax programs, provides pre-departure tax counselling and tax return preparation services for assigned employees.

CompassGuides™ publishes its Compass Navigator™ suite of assignment manuals, administrator guides and checklists that enable Canadian companies and their assigned employees to meet the challenges of global assignments.

CompassGuides also produces its Compass Voyager™ suite of pre-departure planning guides, tax organisers and checklists to help employees plan their departure from Canada.

CompassPoints is not intended as a substitute for competent professional advice. Assignment Tax Program Planning must be tailored to the circumstances of the program. CompassPoints is not intended to be a definitive analysis of the law but rather a guide to matters that should be considered.