Translation disclaimer
This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: [TaxInterpretations translation] For the purposes of the definition of "resident contributor" in subsection 94(1), as proposed in Bill C-10, is a period of residence in Canada that occurs before a period of non-resident status followed by a return to Canada one of the periods counted in determining whether the number of months exceeds 60?
Position: Yes
Reasons: Wording of the text of the proposed amendments
XXXXXXXXXX 2009-032791
Danielle Bouffard
October 20,2009
Dear XXXXXXXXXX,
Re: Non-resident trust - "resident contributor".
Subsection 94(1) of the Income Tax Act (the "Act")
This is in response to your facsimile of June 16, 2009 in which you seek our views on the definition of "resident contributor", as proposed in subsection 94(1) of Bill C-10, in the following hypothetical situation.
Mr. A was a non-resident of Canada until July 31, 2005. On August 1, 2005, he became a resident of Canada. On October 1, 2007, Mr. A left Canada with his wife and established his tax residence in a treaty country to continue his employment. Since his wife cannot remain in their new country of residence without a work visa, Mr. A is considering moving back to Canada. Their expected date of return is August 1, 2009. In connection with his return to Canada as a resident, Mr. A is contemplating transferring assets to a non-resident trust ("immigration trust").
Question
For the purposes of the definition of "resident contributor" in subsection 94(1), as proposed in Bill C-10, when is Mr. A to be considered a "resident contributor" to the immigration trust?
1) July 31, 2010, because the 60-month period provided for in the definition of "resident contributor" runs from the first time Mr. A became a resident of Canada (August 1, 2005)?
2) July 31, 2014, because the 60-month period has elapsed since Mr. A last became a resident of Canada (August 1, 2009)?
3) July 31, 2012, combining all periods during which Mr. A was a resident of Canada (i.e. 26 months prior to August 1, 2009 and 36 months thereafter).
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5 of May 17, 2002, it is the practice of the Canada Revenue Agency (CRA) not to issue written opinions on proposed transactions otherwise than by way of advance income tax rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, the determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you. These comments may, however, under certain circumstances, not apply to your particular situation.
Section 94 of the Act provides that certain income earned by a non-resident trust is subject to Canadian tax. Amendments to the wording of this section, including the addition of definitions in subsection 94(1), were proposed in Bill C-10 An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of certain provisions of that Act and related Acts (39th Parliament, 2nd Session), which was passed by the House of Commons on October 29, 2007 ("Bill C-10"). However, Parliament was dissolved before it received Royal Assent. The said proposals (in their current or amended form) will therefore have to be reintroduced in the House of Commons.
Subsection 94(3), as proposed in Bill C-10, provides special taxation rules in respect of a trust that, at a specified time in its particular taxation year, is a non-resident (determined without reference to subsection 94(3), as proposed), has a "resident contributor" or resident beneficiary and is not an exempt foreign trust. A resident contributor, in respect of a particular trust at any time, is an "entity" (which term includes, inter alia, an individual) that, at that time, is both resident in Canada and a "contributor" (as defined in this subsection) to the trust. For the purposes of that definition, a resident contributor does not include, inter alia, an individual (other than a trust) who has not, at that time, been resident in Canada for a period of, or periods the total of which is, more than 60 months (other than an individual who, before that time, was never non-resident)
For this purpose, we are of the view that any period of residence in Canada even if prior to a period when the person was not resident in Canada would form part of the total number of months, calculated for the purpose of determining whether an individual is a resident contributor for the purposes of proposed section 94. The term "contributor" to a trust at any time, means an entity that, at or before that time, has made a contribution to the trust (being, inter alia, a transfer or loan of property, other than an arm's length transfer) to the trust at or before that time.
Subsection 94(3), as proposed in Bill C-10, provides special taxation rules in respect of a trust that, at a specified time in its particular taxation year, is a non-resident (determined without reference to subsection 94(3), as proposed), has a "resident contributor" or resident beneficiary and is not an exempt foreign trust. A resident contributor, in respect of a particular trust at any time, is an "entity" (which term includes, inter alia, a natural person) that, at that time, is both resident in Canada and a "contributor" (as defined in this subsection) to the trust. For the purposes of that definition, a resident contributor does not include, inter alia, an individual (other than a trust) who has not, at that time, been resident in Canada for a period of, or periods the total of which is, more than 60 months (other than an individual who, before that time, was never non-resident). For this purpose, we are of the view that any period of residence in Canada even if prior to a period when the person was non-resident in Canada would form part of the total number of months, calculated for the purpose of determining whether an individual is a resident contributor for the purposes of proposed section 94. The term "contributor" in respect of a trust at a particular time means an entity that has made a "contribution" (being, inter alia, a transfer or loan of property, other than an arm's length transfer) to the trust at or before that time.
Under the hypothetical situation described herein, the 60-month period would include a first 26-month period from August 1, 2005 to September 30, 2007 and a second 34-month period from August 1, 2009 to May 31, 2012. Thus, for the purposes of subsection 94(3), as proposed in Bill C-10, Mr. A would be a resident contributor to the immigration trust after May 31, 2012.
We hope that these comments are of assistance.
Best regards,
Alain Godin
for the Director
International Operations and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© His Majesty the King in Right of Canada, 2009
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté le Roi du Chef du Canada, 2009
Email this Content