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Non-Resident Trust Essay

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Despite periodic statutory amendments on the taxation of non-resident trusts by the Department of Finance through the years, it was determined that a more stringent and expanded scope of rules were required.

The new section 94

The Department of Finance recognized the issues presented by the old section 94 of the Act and in June 2013 enacted significant reform to the non-resident taxation regime of trusts. One of the results of such reform was the charging provision 94(3) which in effect deemed a non-resident trust to be resident in Canada if there was a “resident contributor” to the trust or a “resident beneficiary” of the trust.
A “resident contributor” for purposes subsection of 94(3) is a living person or partnership resident in Canada who generally makes a non-arms length contribution through a loan or property transfer to a non-resident trust either directly or indirectly. There are certain exclusions to the definition of “resident contributor”, for example, “an individual who was resident in Canada for a period of, or periods the total of which is, not more than 60 months, other than a trust or an individual who before that
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Thibodeau a Canadian resident with all three having a vested interest in a family trust. In accordance with the trust deed, investment decisions were based on the outcome of majority votes. More often than not, investment decisions went in favor of the two Bermuda trustees as opposed to Mr. Thibodeau. In limiting its decision solely on the facts present in this particular case and not attempting to further reason a general trust residence test, the Court found that the trust was resident in Bermuda. This was premised on the simple fact that most of the trustees resided in Bermuda. In light of the Courts’ decision, it was a long-held common law position that residency of trustees was the prevalent factor in determining trust
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