• Recent Changes to Non-Resident Trust Proposals: Welcome News for Pension Plans
  • October 13, 2010 | Authors: Pamela L. Cross; Maria S. Doerksen; R. Andrew G. Harrison; François Morin
  • Law Firms: Borden Ladner Gervais LLP - Ottawa Office ; Borden Ladner Gervais LLP - Calgary Office ; Borden Ladner Gervais LLP - Toronto Office ; Borden Ladner Gervais LLP - Vancouver Office ; Borden Ladner Gervais LLP - Montreal Office
  • On August 27, 2010, the Canadian government once again released draft legislation to amend the Income Tax Act (the “Act”) relating to investments in so-called “non-resident trusts” (NRTs). The NRT rules will operate to deem certain non-resident trusts to be resident in Canada for most income tax purposes, and will cause Canadian resident beneficiaries and Canadian resident contributors of such a trust to be jointly and severally liable for all or some of the non-resident trust’s Canadian income tax. Numerous drafts of these rules, which were first announced in 1999, have been introduced over the last decade. However, none of these prior proposals was enacted. Under the last reiteration of these rules, introduced in 2007, investments by certain tax-exempts, such as Canadian pension funds, in certain non-resident trusts could have potentially resulted in a Canadian tax liability for the Canadian pension fund investor. Lobbying by the Canadian pension community against the application of the NRT rules to tax-exempts such as Canadian pension funds (including a submission on December 11, 2007 by the Pension Investment Association of Canada outlining the draconian consequences of the NRT rules in the context of pension plan investment) has been successful.