CRA indicates that a beneficiary of a trust for CRS purposes includes someone who receives a loan from the trust at a below-market interest rate

Where a resident trust is a “passive non-financial entity” and has a “financial account” with a “reporting financial institution” (RFI), such RFI will have reporting obligations under Pt. XIX if one or more “controlling persons” are “reportable persons.” The s. 270(1) definition of “controlling persons” refers inter alia to the trust’s “settlors” and to a discretionary beneficiary to whom a distribution has been paid or made payable in the calendar year. The CRA’s Guidance on the Common Reporting Standard states that a “person is treated as a beneficiary if … they receive, directly or indirectly, a discretionary distribution from the trust … in the calendar year … .”

Regarding what constitutes an indirect contribution for these purposes, CRA referred approvingly to OECD guidance which, in addition to perhaps more obvious examples such as a trust paying tuition fees or paying off someone’s loan, also indicated that there would be an indirect distribution to someone who received a loan at a below-market rate of interest “or at other non-arm’s length conditions” or whose loan is written off.

CRA also suggested that a “settlor” could include not only the person who initially settled the trust but also anyone who has made a “substantive” contribution to the trust.

Neal Armstrong. Summary of 29 November 2022 CTF Roundtable, Q.10 under s. 270(1) – controlling persons.