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.
XXXXXXXXXX 940285
Attention: XXXXXXXXXX
March 24, 1994
Dear Sirs:
Re: Distributions from Foreign Trusts
This is in reply to your letter dated January 25, 1994 wherein you requested clarification concerning the taxation of distributions received by Canadian residents from non-resident corporations, trusts and mutual fund trusts.
Unless as otherwise stated all references to statute are to the Income Tax Act S.C. 1970-71-72,c.63 as amended consolidated to June 10, 1993 (the "Act").
As indicated in our earlier telephone conversation (XXXXXXXXXX-Laurikainen), due to the general nature of your question, it is difficult to provide a definitive answer. However, we make the following general comments concerning the treatment under the Act of distributions made to residents of Canada by certain non-resident entities (please note that the comments that follow do not deal with the treatment of the proceeds from the disposition of an interest in a non-resident entity).
Dividends received from a non-resident corporation (subject to the provisions of subsection 95(1) of the Act for dividends received from a foreign affiliate) are generally included in income as dividend income for a Canadian resident under subsection 90(1) and paragraph 12(1)(k) of the Act. Income distributions received by a Canadian resident from a non-resident trust or mutual fund trust are generally included in income as income from a trust by the beneficiary under paragraphs 104(13)(c) and 12(1)(m) of the Act. In both cases the source income to the non-resident entity is irrelevant. That is, it does not matter whether the non-resident entity has earned active business income, property income or capital gains. In addition, the period of time the interest in the non-resident entity was held by the Canadian resident would have no bearing on the taxation of distributions received from the entity.
In some circumstances, sections 94 and 94.1 of the Act require that an amount be included in the income of a Canadian resident in respect of an interest in a non-resident entity notwithstanding that the non-resident entity has not made any distributions.
We hope that the above is of assistance to you.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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