News of Note

CRA considers that because the trust company trustee of a TFSA, RRSP, RRIF, RESP or RDSP is required under the Act “to maintain and exercise key decision-making powers and responsibilities over the trust” (e.g., ensuring compliance with ITA requirements including monitoring for non-qualified investments and ensuring that all transactions occurred at fair market value), it follows that such trusts will have their central management and control in Canada, so that they “will always be considered resident in Canada.” Thus, the non-resident holder of a self-directed TFSA was unsuccessful in her arguments that the trust was resident outside Canada based on her making the investment decisions.

CRA’s interpretation could be argued to be consistent with Discovery Trust, where the work performed by Royal Trust, as the Alberta trustee, was somewhat routine.

Neal Armstrong. Summary of 22 March 2018 Internal T.I. 2018-0738201I7 under s. 2(1).

Budget 2018 proposed that the requirement in s. 233.4(4) to file T1134s within 15 months of year end be changed to 6 months respecting taxation years beginning after 2019. Points on this include:

• Some of the G7 countries have filing deadlines that extend beyond 6 months, e.g., (re calendar years): the U.S. – extendible to October 15; the U.K. – December 31; and Germany - extendible to December 31
• Much of the information needed for the T1134s is not required for the Canadian corporate returns due on June 30
• Were there an accelerated filing deadline, 12 months would align with the filing deadline for CbC reporting – but even this would be problematic for jurisdictions such as the U.K. and Germany whose returns might be filed right at the 12-month point.

Neal Armstrong. Summary of 18 May 2018 Joint Committee Submission re accelerated T1134 filings entitled “Reporting Requirements in Respect of Foreign Affiliates” under s. 233.4(4).

CRA uses T1134s in risk-assessment. Generally, the T1134 reporting requirements are more detailed, while CbC reporting provides a higher level of information and uniformity of reporting across jurisdictions. As it gains more experience, it may consider reviewing the overlap to reduce duplication.

Neal Armstrong, Summary of 16 May 2018 IFA Roundtable, Q. 9 under s. 233.4(4).

CRA essentially repeated the points made in the 21 July 2017 Email of the CRA Delaware/Florida Working Group respecting grandfathering of existing LLPs/LLLPs, namely:

• Respecting a requirement that the LLP/LLLP not take positions that are inconsistent with corporate treatment, CRA will accept the filing of a T2 return or of a T1134 or T106 (as well as obtaining a Business Number) based on the announcement at the 2016 IFA Conference that the LLPs/LLLPs were corporations.
• Respecting a requirement that there is no significant change in its membership or activities, this will not be considered to occur by virtue of a transfer of membership between parties not dealing at arm’s length or the issuance of additional memberships to them.
• The fact that the Delaware & Florida LLP or LLLP resulted from a previous conversion from an LLC would not by itself prevent accessing the grandfathering relief.
• The above relief will be applied to LLPs and LLLPs of other jurisdictions having similar (corporate) attributes where they were set up before April 26, 2017.

CRA also declined to rule that a specific French SLP (Société de Libre Partenariat) was a partnership for ITA purposes. Although it had separate legal personality, that was not sufficient to render it a corporation. However, there was no legal authority to support an effective entitlement on the part of the members to share profits and losses earned through the entity: the computation of earnings at the SLP entity level, with a distribution mechanism for its members akin to the declaration and payment of dividends, was found to be very relevant.

Neal Armstrong. Summary of 16 May 2018 IFA Roundtable, Q.8 under s. 96.