7 September 1994 External T.I. 9415545 - UNCLAIMED INTEREST & DIVIDENDS

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.

RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY

Principal Issues:

WHETHER THE REFERENCE TO A "TAXATION YEAR" AND "YEAR" IN THE PREAMBLE TO SUBSECTION 153(4) REFERS TO THE TAXATION YEAR OF THE BROKER/SECURITY DEALER OR THAT OF THE UNIDENTIFIED INDIVIDUAL, NAMELY A CALENDAR YEAR.

Position TAKEN:

THE TAXATION YEAR OF THE BROKER/SECURITY DEALER.

Reasons FOR POSITION TAKEN:

LEGISLATION.

		941554
XXXXXXXXXX	G.Donell

Attention: XXXXXXXXXX

September 7, 1994

Dear Sirs:

Re: Unclaimed amounts - Dividends or interest

This is in reply to your letter of May 30, 1994 and your telephone conversation with Mr. Gary Donell Thursday, September 1, 1994 in which you have requested either confirmation of your current practice of remitting withholding taxes under subsection 153(4) of the Income Tax Act ("Act"), or an elaboration of the correct method of determining the appropriate timing of such remittances.

From the above-mentioned communication it is our understanding that XXXXXXXXXX determines the timing of the required remittance under subsection 153(4) of the Act with reference to a calendar year. In your letter you state that individual information reporting requirements for calendar year 1993 receipts of interest and dividends were required to be filed with the Department in the 1994 calendar year, by February 28, 1994. You also quote from a passage contained in Chapter 14 of the 1993 T5 Guide that reads, in part, "...unclaimed dividends or...interest...refer to dividends or interest that you receive in a particular taxation year on behalf of another person (beneficial owner) who remains unknown at the end of your subsequent taxation year.". You have interpreted the reference to the "subsequent taxation year" as meaning the taxation year that falls in the calendar year immediately following the calendar year in which information reporting is required or 1995 in reference to the above amounts received in the 1993 calendar year. Based upon this interpretation you would remit the appropriate withholding tax within 60 days of your 1995 taxation year end of March 31 or by May 30, 1995. We do not agree with your interpretation of this passage. In addition Chapter 14 of the 1993 T5 guide contains a detailed example that accurately describes the remitting requirements of subsection 153(4) of the Act which we will describe below.

The opening words of subsection 153(4) of the Act read:

"Where at the end of a taxpayer's taxation year the person beneficially entitled to an amount received by the taxpayer after 1984 and before the year as or in respect of dividends, interest or proceeds of disposition of property is unknown to the taxpayer, the taxpayer shall remit to the Receiver General on or before the day that is 60 days after the end of the year on account of the tax payable under this Act by that person an amount equal to..."

The legislation uses the word "taxpayer" to refer to the broker, security dealer or other such person who has received an amount of interest, dividend or proceeds of disposition but is unable to identify the person beneficially entitled to such an amount.

The legislation allows one complete taxation year to lapse before remittance requirements are imposed, but as indicated the reference is to the "taxpayer's taxation year" and not that of the beneficial owner. As an example and using a March 31 taxation year end, withholding taxes under subsection 153(4) of the Act for amounts received between April 1, 1992 and March 31, 1993 would be required to be remitted, without penalty or interest, by May 30, 1994 because these amounts are received in your 1993 taxation year and have been outstanding throughout your 1994 taxation year and remain unidentified on March 31, 1994. As can be seen, the remittance method you have adopted results in withholding taxes on unclaimed amounts received being remitted one year late and this method is not in accordance with the requirements of subsection 153(4) of the Act.

While we trust that our comments are of assistance to you, we would advise that they do not constitute an advance income tax ruling and are, therefore, not binding upon the Department in respect of any particular situation.

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch