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: Can the Income Tax Rulings Directorate advise whether a German Family Trust (Familienstiftung) is a trust or a corporation for purposes of the Income Tax Act?
Position: No.
Reasons: It will be a question of fact.
XXXXXXXXXX 2011-041514
Phillip Kohnen, CMA
(613) 946-4189
August 4, 2011
Dear XXXXXXXXXX :
Re: Tax status of a German Family Trust or "Familienstiftung"
This is in reply to your letter of July 18, 2011 in which you requested a technical interpretation with respect to the Canadian tax status of a German Family Trust or Familienstiftung.
As was noted during the Canada Revenue Agency ("CRA") Roundtable at the 2011 IFA International Tax Seminar (organized by the International Fiscal Association Canada), the Income Tax Rulings Directorate no longer provides advance income tax rulings to confirm the characterization of foreign entities for Canadian tax purposes. Given that it will be a question of fact as to what a particular foreign entity will constitute for Canadian tax purposes, we are also unable to provide our views on such characterization issues in response to technical interpretations requested by taxpayers or their representatives.
As you are aware, the Canadian income tax system is one of self-assessment. As such, it is expected that taxpayers will make reasonable determinations as to what are the appropriate entity characterizations for tax purposes. As the CRA has previously stated at the 2007 Canadian Tax Foundation Annual Conference, it is our view that a two-step approach is appropriate in making such a determination.
The first step in the approach involves determining the characteristics of the foreign business association under the foreign commercial law. The characteristics identified are then compared with those of recognized categories of business associations under Canadian commercial law in order to classify the foreign business association under one of those categories.
Yours truly,
Phillip Kohnen
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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