Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: reports of loss of tax revenue on the emigration of a trust or on the distribution of property to a non-resident beneficiary
Position: referred to draft legislation which proposes to ensure that all persons, including trusts, who leave Canada or transfer property from Canada, will realize a deemed disposition at the time of departure (with exceptions for Canadian real estate and Canadian business property which is taxed when sold)
Reasons: House of Commons Standing committee report of Set 18, 1996; draft legislation on migration dated Dec 17, 1999
May 29, 2000
XXXXXXXXXX
Dear XXXXXXXXXX
The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your letter of April 9, 2000, concerning the taxation of property when an owner leaves Canada and the court challenge to an advance income tax ruling which pertains to this issue.
The confidentiality provisions of the Income Tax Act prevent officials of the Canada Customs and Revenue Agency (CCRA) from divulging information from a taxpayer's file without his or her written authorization. The confidentiality provisions of the Act are fundamental to the integrity of a self-assessment system and the CCRA takes that responsibility very seriously. The court challenge referred to in the newspaper article enclosed with your letter illustrates this point. While all Canadians have an interest in tax issues and a right to complete and accurate information concerning those issues, they also have a right to expect that personal and financial information provided to us remains private and confidential. As this matter is still before the Federal Court of Appeal, I cannot comment further on the court challenge.
The role of the CCRA is to administer and enforce the Act as passed by Parliament, while the Department of Finance is responsible for tax policy and any proposed changes to the Act. With respect to the comment in the last paragraph of your letter concerning the CCRA's responsibility to collect taxes, the CCRA is committed to applying the tax laws in a consistent and fair manner, which includes the collection of the full amount of tax owing under the law. However, the amount of tax payable for a particular year is based on the law in force for that year and the CCRA does not have the discretion or right to increase the amount payable. The Declaration of Taxpayer Rights, which is printed on the back page of the General Income Tax and Benefit Guide, provides further information concerning a taxpayer's rights and obligations under the Act.
Generally, the Act currently provides that any person residing in Canada who owns taxable Canadian property may leave Canada without having to pay tax on this type of property at the time of departure. However, when a former resident of Canada sells taxable Canadian property, any capital gain realized on the sale is subject to tax in Canada, unless the application of this rule is affected by a tax treaty between Canada and the former resident's new country of residence. On the other hand, a resident of Canada is considered to have disposed of all property that is not taxable Canadian property when that person ceases to be resident in Canada with the result that a capital gain will be realized in respect of any increase in the value of this type of property from the time the person either acquired the property or became resident in Canada. In this regard, the newspaper article submitted with your letter appears to confuse the tax issues related to the type of property which qualifies as taxable Canadian property with the tax issues related to the information reporting rules for assets held outside of Canada. The current rules which require a resident of Canada to provide additional information in respect of assets held outside of Canada are intended to ensure that residents of Canada pay the appropriate amount of income tax on income accruing on their foreign holdings.
The concern raised in your letter with respect to a possible loophole or favouritism in respect of a specific person relates to one of the tax policy issues raised in the Auditor General's 1995 report. Those issues were considered by the House of Commons Standing Committee on Finance in its report released on September 18, 1996. Even though the committee found that the specific cases referred to in the Auditor General's report were dealt with in accordance with the existing provisions of the Act and that there was no evidence of wrongdoing or interference in the decision making process, it recommended that the Act be amended to address the underlying tax policy issues.
The Department of Finance responded to those recommendations on October 2, 1996, by announcing draft amendments to the Act, which, when enacted, will be effective as of that date. As a result, any person who leaves or transfers property from Canada will pay tax on most capital gains that have accrued in Canada up to the time of departure. Exceptions to this rule will include gains that accrue on Canadian real estate and Canadian business property, which can always be taxed when they are ultimately sold. On December 23, 1998, the Honourable Paul Martin, Minister of Finance, released detailed proposals to implement the draft amendments announced on October 2, 1996. Revised proposals were released on December 17, 1999, reflecting further changes, which the Minister of Finance announced on September 10, 1999. While public consultation on the proposals adds time to the legislative process, such consultation is beneficial in ensuring that all relevant issues are considered.
I appreciate the opportunity to address your concerns.
Yours sincerely,
Bill McCloskey
Assistant Commissioner
Policy and Legislation Branch
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