Most multi-national employee benefit plans with Canadian employees face intractable issues in applying the NRT rules

The non-resident trust rules in s. 94 are at odds with the realities of global employer benefit plans. Among other issues:

• It may be unclear whether a (usually foreign law) plan is a trust or a custodial arrangement – or it might be both, such as a U.K. sharesave plan.
• The typical non-U.S. multinational EBP will not satisfy the requirement in para. (g) of the "exempt foreign trust" definition that it provide benefits primarily for services rendered in its country of residence – for example, a U.K. retirement plan which is established in Jersey, or a French "trust" where the French employees represent only 49% of the worldwide workforce.
• Respecting the s. 94(2)(k.1) rule deeming there to be a resident contribution when any person has made transfers for the benefit of an employee of a Canadian employer, it may be difficult to determine whether ad hoc contributions to the global EBP by the foreign parent are made in respect of any particular employee - for example, if the parent contributed in 2010, and the first award to an employee of a Canadian entity is made in 2013.
• Application of the exemption for "qualifying services" may require determining when services for a particular award are rendered – for example, if an employee who will become a "bad Canadian" under a 60-month rule is granted a new three-year vesting RSU, when are the services rendered to which this award relates?
• If the trust elects to limit its exposure to Canadian tax on the "resident portion" of the trust, looking at the ratio of the beneficial interests of the Canadian employees versus the others may not reflect the actual contributions which have gone into the trust – nor may it be appropriate to assume that vested beneficial interests are equal to interests with a substantial risk of forfeiture.

Neal Armstrong.  Summaries of Peter Megoudis, "The Canadian Non-resident Trust Rules and Global Employee Benefit Plan Trusts," Taxation of Executive Compensation and Retirement (Federated Press), Vol. 24, No. 3, October 2012 [sic], p. 1583 under s. 94(3), s. 94(1) – exempt trust – (g), s. 94(2)(k.1), s. 94(1) – exempt trust – (f), and s. 94(1) – resident portion.