25 September 1990 Income Tax Severed Letter AC74724 - Privileges and Immunities of International Organizations

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.

September 25, 1990

C. Savage                                Rulings Directorate
A/Director                               G. Arsenaul
Provincial and International             957-2126
Relations Division
                                         7-4724

Subject:  Privileges and Immunities
          (International Organizations) Act

This is in reply to your memorandum dated February 13, 1990. We do not have sufficient information concerning the staff retirement funds or the circumstances under consideration by you in connection therewith to comment definitively as to the proper tax treatment thereof.

However, we can make the following observations which hopefully will be of assistance to you:

1.        In respect of a pension plan, it is generally not
          accurate to conclude that the assets of the fund
          beneficially belong to the employees.  The assets of the
          fund may in fact be owned legally and beneficially by the
          employer, which may simply have a contractual obligation
          to provide a pension to its employees.  In this case,
          there will likely not be a trust.  Alternatively, there
          may be a trust and certain employees may have vested
          rights in respect thereof.  In this case, even as to the
          vested rights of employees, it is probably more
          appropriate to consider the employees having rights under
          the plan and  "in respect of" the assets of the fund than
          it is to consider the employees to be the beneficial
          owners of the assets of the fund.

2.        At common law, a trust is not a "separate legal entity". 
          While subsection 104(2) of the Income Tax Act provides  
          that a trust shall for purposes of thatAct be deemed to 
          be in respect of the trust property an individual, this 
          provision would not, in our opinion, have the effect of
          restricting or overriding any exemption available by    
          virtue of the Privileges and Immunities (International  
          Organizations) Act (the "Exempting Legislation").

3.        The Exempting Legislation does not only exempt from     
          taxation the assets and income of the exemptorganization.
          It also specifically exempts the organization itself from 
          taxation.  Generally, as indicated by subsection 104(1),
          a reference to a trust is a reference to the trustee. The
          trustee is the taxpayer.  This is because, as indicated 
          above, a trust is not a "separate legal entity".  Any
          assessment of a trust is an assessment of the trustee
          (albeit in its capacity as trustee) and is issued to and
          enforced against the trustee.  Accordingly, if the
          pension plan is a trust and if the exempt organization is
          the trustee and if the establishment of the pension plan
          is permitted by the exempt organization's character and
          is in furtherance of its objects, we are of the view that
          such a pension plan trust would be exempt from tax by
          virtue of the Exempting Legislation.

for Director Reorganization and Non-Resident Division Rulings Directorate Legislative and Intergovernmental Affairs Branch