3 February 2011 Internal T.I. 2011-0392131I7 - Classification foreign entity - Trust Enterprise

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: Is a Liechtenstein Trust Enterprise a trust or a corporation for the purposes of the Act?

Position: In the present instance, a trust.

Reasons: Two-step approach applied to the facts submitted considering the applicable foreign law.

							February 3, 2011

Neil Dhanani					HEADQUARTERS
International Tax Auditor			Income Tax Rulings
Toronto North TSO 				  Directorate
5001 Yonge St					Yannick Roulier
Toronto ON  M2N 6R9				(613) 957-2134

							2011-039213

Classification of a foreign entity - Trust enterprise (Liechtenstein)

This is in reply to a memorandum faxed on January 7, 2011, in which you asked for our views with respect to the tax status of a particular Liechtenstein Trust Enterprise named XXXXXXXXXX (the "Entity") for the purposes of the application of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended to the date of the present ("Act"). We previously provided a written opinion to Jaime S. Cabrera dated July 15, 2010 (document number 2010-035370, hereinafter the "Opinion") in respect of the classification of the Entity for the period starting XXXXXXXXXX.

For the period starting XXXXXXXXXX and ending XXXXXXXXXX , you would like to know if the Entity is a trust or a corporation for the purposes of the Act.

Background

We refer to the Opinion for the relevant facts. In reaching our conclusions in the Opinion, we considered the Liechtensteinishes Personen und Gesellschatftsrecht ("Liechtenstein Law on Persons and Companies", "PGR") and the XXXXXXXXXX of the Entity dated XXXXXXXXXX ("Articles"). With your memorandum of January 7, 2011 you provided a copy of the XXXXXXXXXX of the Entity dated XXXXXXXXXX ("Former Articles").

The Former Articles are substantially the same as the Articles, except for the following:

1. Pursuant to the Former Articles, the Entity's fund amounts to XXXXXXXXXX , contributed by means of cash and divided into XXXXXXXXXX bearer coupons of XXXXXXXXXX each ("Coupon").

2. The Former Articles has been signed by XXXXXXXXXX persons identified as follow:

XXXXXXXXXX

You have submitted no information in respect of the members of the board of trustees for the period starting XXXXXXXXXX and ending XXXXXXXXXX , and you did not bring to our attention any modification or amendment made to the Entity's Former Articles during the same period of time.

Comments

We are of the view that the dominant characteristics of the Entity support the conclusion that it should be classified as a trust from XXXXXXXXXX to XXXXXXXXXX , for the purposes of the Act. We reach this conclusion based essentially on our previous Opinion and on the assumption that the Former Articles have not been modified during this period of time.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CRA's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Celine Charbonneau (613) 957-2137. A copy will be sent to you for delivery to the client.

We trust that these comments will be of assistance.

Yours truly,

Alain Godin, Manager
for Director International and trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch