25 October 2004 External T.I. 2003-0009211E5 - Paragraph 214(3)(f)

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.

Principal Issues: Paragraph 214(3)(f) and timing of remittance of withholding tax.

Position: Based on facts, withholding tax exigible when amount paid to beneficiary.

Reasons: Based on facts.

									2003-000921
XXXXXXXXXX 								S. Chua
									613 957-2115
October 25, 2004

Dear XXXXXXXXXX:

Re : Part XIII Withholding Tax - meaning of paid or "credited"

We are writing in response to your letter in which you ask for our comments on the above matter. The hypothetical facts you have provided are as follows:

Facts

1. A trust that is an inter-vivos personal trust resident in Canada has a taxation year ended December 31 (the "Trust"). Distributions of Trust income or capital can only be made at the discretion of the trustees (the "Trustees").

2. The sole income and capital beneficiary of the Trust is a non-resident of Canada (the "Beneficiary").

3. On June 30, 2003, the Trustees passed an irrevocable resolution (the "Resolution") that the Beneficiary was entitled to the net income of the Trust for the taxation year ending December 31, 2003 (the "Taxation Year") and the net income would be paid over to him on March 31, 2004.

4. The income of the Trust was calculated on March 15, 2004.

5. In computing the Trust's income for the Taxation Year, the amount deducted as income for the year that became payable to the Beneficiary equalled the net income of the Trust and consequently, the trust reported in its T3 income tax return, nil taxable income for the Taxation Year. The Trust's T3 return was filed on a timely basis i.e. by March 31, 2004.

6. The net income was paid to the Beneficiary on March 31, 2004.

From the Facts above, you query when should the Part XIII withholding tax have been remitted.

Our Comments

Written confirmation of the tax implications inherent in real transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5. However, we are prepared to provide you with the following general comments.

Based on the above hypothetical facts, withholding tax should, pursuant to subsection 215(1), be withheld on March 31, 2004 and forthwith remitted to the Receiver General. However, pursuant to the administrative policy set out in paragraph 54 of Information Circular IC 77-16R4, if the payment is received by either a Taxation Services Office or Taxation Centre or a Canadian financial institution on or before the 15th day of the month following the date of payment, i.e. by April 15, 2004, it will be considered in compliance with subsection 215(1) of the Act.

We trust that the foregoing will be of assistance to you.

Yours truly

Olli Laurikainen
Section Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Planning Branch