2 February 1982 Income Tax Severed Letter

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.

February 2, 1982

Non-Corporate Rulings Division D.S. Delorey 995-0051

Estate & Trust Income Canada-U. K. Tax Convention

This is in reply to your memorandum of December 17, 1981 concerning a U.K. resident beneficiary of a Canadian trust or estate.

The U.K. beneficiary, pursuant to the provisions of paragraphs 212(1)(c) and 214(3)(f), is initially taxable at 25% on the amount that would, if he were a resident of Canada, be taxable pursuant to the provisions of subsections 104(13) and 104(24). This tax is exigible unless a provision of the Canada-U.K. Treaty overrides it.

Since the applicable provision (Article XX) refers to income "received" from an estate or trust, it is your view that the income taxable under 212(1)(c), less any amount actually paid to the U.K. resident, would be subject to tax at 25%. We agree that your view is technically correct.

We suggest however that you consider the administrative problems that would arise from assessing in the manner suggested by you. For instance, if we taxed the income at 25% in the year 1982 and such income was paid to the U.K. resident in 1984, Article XX of the Canada-U.K. Convention would dictate that we refund the additional 10% that was withheld in 1982.

Since you also referred to Article XXVII(2) of the Canada-U.K. Treaty, we reviewed that Article and concluded that it has no application to income from an estate or trust. The purpose of Article XXVII is to limit the application of the 15% reduced rate to only that portion of certain income actually remitted to and received by the U.K. resident. Article XX already does that with respect to income from an estate or trust.

In view of the administration problem referred to above, we have forwarded a copy of our reply to Mr. T.G. McIntyre of the Accounting and Collections Division at Head Office. You may wish to contact Mr. McIntyre in this regard.

for Director Non-Corporate Rulings Division