2014-0547721E5 T1135 reporting for a trust

Principal Issues: Does a trust whose sole beneficiaries are tax exempt under 149(1)(c) of the Act have to file a T1135?

Position: No.

Reasons: The Act.

Author: Deak, Andrew
Section: 233.3; 149(1)(c)

XXXXXXXXXX                                                                                                                                      2014-054772
                                                                                                                                                              Andrew Deak

March 13, 2015

Dear XXXXXXXXXX:

Subject:  T1135 reporting obligations for a trust

We are writing in reply to your email of September 9, 2014, concerning the foreign reporting requirements under the Income Tax Act (the “Act”) for a trust whose sole beneficiaries are Indian Band members who are exempt under paragraph 149(1)(c) of the Act. We apologize for the delay in responding to your email.

In your email, you describe a trust where the only persons beneficially interested in the trust are Indian Bands, each of which is a Band as defined in the Indian Act and each of which is exempt from tax pursuant to paragraph 149(1)(c) of the Act.  Your interpretation is that the trust would not meet the definition of “specified Canadian entity” in subsection 233.3(1) and is therefore not a “reporting entity” and not required to report the information. 

Our Comments

This technical interpretation provides general comments about the provisions of the Act. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Subsection 233.3(3) requires a reporting entity to file an information return in prescribed form, which is the Form T1135, Foreign Income Verification Statement.  A reporting entity is defined in subsection 233.3(1) as being a “specified Canadian entity for the year or period where, at any time … in the year or period, the total of all amounts each of which is the cost amount to the entity of a specified foreign property of the entity exceeds $100,000.”  A specified Canadian entity is defined as “a taxpayer resident in Canada in the year that is not… (iii) a person (other than a trust) all of whose taxable income for the year is exempt from tax under Part I…, nor (viii) a trust in which all persons beneficially interested are persons described in subparagraphs (i) to (vii).”

You described a trust where the only persons beneficially interested in the trust are exempt under Part I by way of paragraph 149(1)(c). In that scenario, the trust would be excluded from the meaning of “specified Canadian entity” under subparagraph (a)(viii) of the definition. As such, the trust would not be a reporting entity under subsection 233.3(1) and would not be required to file a Form T1135.

We trust our comments will be of assistance.

Yours truly,

Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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