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: Does filing form T2062 imply the application of the provisions of section 116 of the Act?
Position: No.
Reasons: TCP determination is a question of fact.
XXXXXXXXXX
2012-046522
V. Srikanth
June 25, 2014
Dear XXXXXXXXXX:
Re: Withholding and filing requirements of a trust distribution to non-resident beneficiaries
This is in response to your e-mail correspondence between September 28 and October 10, 2012 and our recent telephone conversation (Srikanth/XXXXXXXXXX) on February 26, 2014. In your enquiry you requested our views on the filing of form T2062 entitled, Request by a Non-Resident for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property', and withholding requirements under certain conditions. Specifically, you wanted our views on whether filing of form T2062 by a trust resident in Canada in respect of a distribution to a non-resident beneficiary would result in the application of section 116 of the Income Tax Act (the "Act"). Please accept our apologies for the delay in responding.
Our Comments
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings. Where the particular transactions are completed, the inquiry should be addressed to the audit division of the applicable Canada Revenue Agency ("CRA") Tax Services Office.
Subsection 116(1) provides that if a non-resident person proposes to dispose of taxable Canadian property ("TCP") (other than property described in subsection (5.2) and excluded property as defined in subsection (6)), the non-resident person, may at any time before the disposition, send the Minister a notice setting out certain information with respect to the purchaser of the property, a description of the property, the proceeds of disposition and the adjusted cost base. This is done by completing form T2062. Whether a property is a TCP is a question of fact and the onus is on the taxpayer to make this determination.
The CRA's response at the 2010 Canadian Tax Foundation Conference with regard to the question of whether CRA would be willing to issue a certificate pursuant to section 116 where the shares to be disposed would not be considered to be taxable Canadian property, was as follows:
"The CRA does not review or make a determination of whether a property is taxable Canadian property in the course of processing a section 116 certificate request. Accordingly, a certificate may be issued under subsection 116(2) or 116(4) in respect of property that is not taxable Canadian property. However, as a determination is not made, the fact that the property may not be taxable Canadian property will not influence the amount that must be paid or security provided by the vendor, in order to qualify under subsection 116(2) or subsection 116(4) to receive the certificate. It will also not influence the vendor information required to be submitted."
In your above-mentioned enquiry, you further wanted our views on the application of reduced withholding rates in respect of a distribution of income to a non-resident beneficiary in a treaty country by a Canadian resident trust. In our view, where there is a claim for reduced withholding as a result of a treaty exemption, the onus is on the payor to establish the eligibility for the reduced rate. Information Circular, IC 76-12R6 entitled, Applicable rate of part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax convention', read in combination with the pending updates to it (available on the CRA website), discusses issues relating to the Part XIII withholdings and treaty benefits. You may also refer to guide T4061 NR4 - Non-Resident Tax Withholding, Remitting, and Reporting'.
The following CRA documents that we indicated to you in our e-mail dated February 26, 2014, may provide you with additional information on this subject matter:
2011-0419191E5, 2010-0385771E5, 2010-0371391E5, 2010-0387141 and 2007-0244291E5.
We trust our comments will be of assistance to you.
Yours truly,
Phil Kohnen
Manager, Trusts Section I
Financial Industries 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
© Her Majesty the Queen in Right of Canada, 2014
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 la Reine du Chef du Canada, 2014
Email this Content