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.
STEP CRA Roundtable - 2010
Principal Issues: Under what circumstances do trusts have to make tax instalments?
Position: 1. Trusts are taxed as individuals and may be required to make instalment payments if conditions in s. 156 of the Act are met. Inter vivos trusts may be required to make quarterly instalment payments if the inter vivos trust's net tax owing is more than $3,000 in 2010 and in either 2009 or 2008. However, under the current CRA policy, no assessments are made on instalment interest and penalties where an inter vivos trust does not make instalment payments. 2. Testamentary trusts are not required to make quarterly instalment payments and are allowed instead to pay their tax payable for the year within 90 days from the end of the taxation year.
Reasons: 1. By virtue of section 156 of the Act. 2. By virtue of paragraph 104(23)(e) of the Act.
Question #25
Under what circumstances do trusts have to make tax instalments?
Answer
Section 156 requires an individual to make instalment payments if certain conditions are met. Since trusts are taxed as individuals, generally, they are subject to these instalment payment provisions. For example, an inter vivos trust, including a mutual fund trust, may be required to make quarterly instalments during the year on account of its Part I tax payable for the year where the trust's net tax owing for the particular year, and for either of the 2 preceding taxation years, exceeds the trust's instalment threshold for that year. The terms "net tax owing" and "instalment threshold" are defined in subsection 156.1(1). For more information, please refer to Pamphlet P110, Paying Your Income Tax by Instalments under the heading "Who has to pay by instalments?". Notwithstanding the above, we would note that under the current administrative policy, the CRA does not assess instalment interest and penalties where an inter vivos trust does not make instalment payments required under section 156.
A testamentary trust on the other hand, instead of making quarterly instalment payments, is allowed to pay its tax payable for the year within 90 days from the end of the taxation year by virtue of paragraph 104(23)(e).
S. Bernards
(613) 957-2139
2010-036318
June 8, 2010
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