2016-0657531E5 Deemed resident trust and "designated beneficiary"

Principal Issues: Whether a non-resident trust deemed to be resident in Canada under paragraph 94(3)(a) would be a "designated beneficiary" for purposes of Part XII.2 of the Act.

Position: Yes

Reasons: Paragraph 94(3)(a) does not refer to the provisions contained in Part XII.2.

Author: Harris, Judith
Section: 94(3)(a), 210(1)

XXXXXXXXXX                                                                                                                                    2016-065753
                                                                                                                                                            Judith Harris
February 9, 2017

Dear XXXXXXXXXX:

RE:  Deemed resident trust as “designated beneficiary” for purposes of Part XII.2

This is in reply to your email of July 11, 2016 requesting our views regarding the application of paragraph 94(3)(a) of the Income Tax Act (the Act) in the context of the definition of “designated beneficiary” in subsection 210(1) of the Act.

You noted that, for purposes of Part XII.2, a “designated beneficiary” includes a non-resident person, which is defined in subsection 248(1) to mean “not resident in Canada”.  Pursuant to paragraph 94(3)(a), a trust that is otherwise a non-resident of Canada is, in certain circumstances, deemed to be resident in Canada throughout a particular taxation year, for purposes of the provisions of the Act set out in subparagraphs 94(3)(a)(i) to (x).  You asked whether a non-resident trust that is deemed to be resident in Canada under the provisions of paragraph 94(3)(a) would be considered to be a “non-resident person” for purposes of paragraph (a) of the definition of “designated beneficiary” in subsection 210(1) of the Act.

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 IC70-6R7, Advance Income Tax Rulings and Technical Interpretations.

Although paragraph 94(3)(a) deems a particular non-resident trust to be resident in Canada for purposes of the provisions listed in subparagraphs 94(3)(a)(i) to (x), none of the provisions in Part XII.2 are expressly or implicitly referred to in subparagraphs 94(3)(a)(i) to (x).  Accordingly, such a non-resident trust is still considered to be a non-resident for purposes of the definition of “designated beneficiary” in subsection 210(1), and is therefore a “non-resident person” for purposes of this definition.

We trust that the above comments will be of assistance to you.

Yours truly,

Steve Fron CPA, CA
Manager Trust Section II
Financial Institutions and Trust Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency

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