2016-0673361E5 Section 230 of the Regulations

Principal Issues: Where mutual fund securities are held in nominee form by the dealer, on behalf of the client, when the client disposes of the units, who is required to issue an information return (T5008 slip) to the client under section 230 of the Regulations? If both the dealer and mutual fund are required to issue T5008 slips to the investor under section 230 of the Regulations, are there duplicate T5008 slips being issued to the investor?

Position: Adoption of an administrative position by Assessing to avoid the duplication of T5008 slips being issued by the mutual fund and the dealer to the investor.

Reasons: See memo.

Author: Moore, Gwen
Section: 230(3); 230(6)

XXXXXXXXXX                                                                                                                           2016-067336

XXXXXXXXXX

November 8, 2016

Dear XXXXXXXXXX:

This is in reply to your letter of October 13, 2015, addressed to the Department of Finance and your subsequent email of June 24, 2016, concerning a situation where duplicate Form T5008 information returns are issued to certain investors redeeming units or shares of mutual funds. 

In particular, the issue has arisen where the mutual fund securities were held in nominee form by a dealer, on behalf of a client.  It is your view that section 230 of the Income Tax Regulations (the “Regulations”) provides that there is an obligation to issue an information return for both the mutual fund whose units or shares were redeemed and the dealer whose client had made the redemption.  You have indicated that this has resulted in some cases with T5008 slips being issued to the redeeming client by both the mutual fund and the dealer. You are concerned about duplicate reporting of T5008 slips by both the mutual fund and the dealer.

Our Comments

Subsection 230(3) of the Regulations provides that every person (other than an individual who is not a trust) who in a calendar year redeems, acquires or cancels any securities issued by that person shall make an information return for the year in prescribed form (T5008 slip) in respect of each such transaction, with some exceptions. Subsection 230(6) of the Regulations provides that every person who while acting as nominee or agent for another person in respect of a sale or other transaction to which subsection 230(2), (3) or (5) of the Regulations applies, receives the proceeds of the sale or other transaction shall, where the transaction is carried out in the name of the nominee or agent, make an information return in prescribed form (T5008 slip).

We understand that Ms. Louise DesLauriers, Manager, InfoDec Development, Assessment, Benefit, and Service Branch, spoke at the Investment Funds Institute of Canada Conference on September 29, 2016, regarding this issue. Ms Deslauriers announced that an administrative policy would be adopted by the Canada Revenue Agency (“CRA”) to avoid the duplication of T5008 slips being issued by both the mutual fund and dealer to the client. This issue was also discussed during the telephone conversation of October 13, 2016 (XXXXXXXXXX/ Gwen Moore).

To align industry practices for T5008 slip reporting and filing with the CRA and eliminate the double reporting of dispositions to clients, when investment funds are held in nominee form through an Investment Industry Regulatory Organization of Canada (“IIROC”) dealer, only the dealer would be required to file the T5008 slips with the CRA and provide a copy of the T5008 slip to the client. When investment funds are held in nominee form through a mutual fund dealer (e.g. Mutual Funds Dealers Association “MFDA” or Autorité des Marchés Financiers “AMF”), only the fund manager would be required to file T5008 slips with the CRA and provide a copy of the T5008 slip to the client.

We trust that our comments will be of assistance.

Yours truly,

G. Moore
For Director
Partnerships and Corporate Financing Section
Reorganizations Division
Income Tax Rulings Directorate

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