Income Tax Act

Marginal note:Application of certain provisions to trusts not resident in Canada

• 94 (1) Where,

  • (a) at any time in a taxation year of a trust that is not resident in Canada or that, but for paragraph 94(1)(c), would not be so resident, a person beneficially interested in the trust (in this section referred to as a “beneficiary”) was

    • (i) a person resident in Canada,

    • (ii) a corporation or trust with which a person resident in Canada was not dealing at arm’s length, or

    • (iii) a controlled foreign affiliate of a person resident in Canada, and

  • (b) at any time in or before the taxation year of the trust,

    • (i) the trust, or a non-resident corporation that would, if the trust were resident in Canada, be a controlled foreign affiliate of the trust, has, other than in prescribed circumstances, acquired property, directly or indirectly in any manner whatever, from

      • (A) a particular person who

        • (I) was the beneficiary referred to in paragraph 94(1)(a), was related to that beneficiary or was the uncle, aunt, nephew or niece of that beneficiary,

        • (II) was resident in Canada at any time in the 18 month period before the end of that year or, in the case of a person who has ceased to exist, was resident in Canada at any time in the 18 month period before the person ceased to exist, and

        • (III) in the case of an individual, had before the end of that year been resident in Canada for a period of, or periods the total of which is, more than 60 months, or

      • (B) a trust or corporation that acquired the property, directly or indirectly in any manner whatever, from a particular person described in clause 94(1)(b)(i)(A) with whom it was not dealing at arm’s length

      and the trust was not

      • (C) an inter vivos trust created at any time before 1960 by a person who at that time was a non-resident person,

      • (D) a testamentary trust that arose as a consequence of the death of an individual before 1976, or

      • (E) governed by a foreign retirement arrangement, or

    • (ii) all or any part of the interest of the beneficiary in the trust was acquired directly or indirectly by the beneficiary by way of

      • (A) purchase,

      • (B) gift, bequest or inheritance from a person referred to in clause 94(1)(b)(i)(A) or 94(1)(b)(i)(B), or

      • (C) the exercise of a power of appointment by a person referred to in clause 94(1)(b)(i)(A) or 94(1)(b)(i)(B),

  the following rules apply for that taxation year of the trust:

  • (c) where the amount of the income or capital of the trust to be distributed at any time to any beneficiary of the trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power,

    • (i) the trust is deemed for the purposes of this Part and sections 233.3 and 233.4 to be a person resident in Canada no part of whose taxable income is exempt because of section 149 from tax under this Part and whose taxable income for the year is the amount, if any, by which the total of

      • (A) the amount, if any, that would but for this subparagraph be its taxable income earned in Canada for the year,

      • (B) the amount that would be its foreign accrual property income for the year if

        • (I) except for the purpose of applying subsections 104(4) to (5.2) to days after 1998 that are determined under subsection 104(4), the trust were a non-resident corporation all the shares of which were owned by a person who was resident in Canada,

        • (II) the description of A in the definition foreign accrual property income in subsection 95(1) were, in respect of dividends received after 1998, read without reference to paragraph (b) of that description,

        • (III) the descriptions of B and E in that definition were, in respect of dispositions that occur after 1998, read without reference to “other than dispositions of excluded property to which none of paragraphs (2)(c), (d) and (e) apply”,

        • (IV) the value of C in that definition were nil, and

        • (V) for the purposes of computing the trust’s foreign accrual property income, the consequences of the application of subsections 104(4) to (5.2) applied in respect of days after 1998 that are determined under subsection 104(4),

      • (C) the amount, if any, by which the total of all amounts each of which is an amount required by subsection 91(1) or (3) to be included in computing its income for the year exceeds the total of all amounts each of which is an amount deducted by it for that year under subsection 91(2), (4) or (5), and

      • (D) the amount, if any, required by section 94.1 to be included in computing its income for the year

      exceeds

      • (E) the amount, if any, by which the total of all amounts each of which is an amount deducted by it under subsection 91(2), (4) or (5) in computing its income for the year exceeds the total of all amounts each of which is an amount included in computing its income for the year because of subsection 91(1) or (3), and

    • (ii) for the purposes of section 126,

      • (A) the amount that would be determined under subparagraph (i) in respect of the trust for the year, if that subparagraph were read without reference to clause (i)(A), is deemed to be income of the trust for the year from sources in the country other than Canada in which the trust would, but for subparagraph (i), be resident, and

      • (B) any income or profits tax paid by the trust for the year (other than any tax paid because of this section), to the extent that it can reasonably be regarded as having been paid in respect of that income, is deemed to be non-business income tax paid by the trust to the government of that country, and

  • (d) in any other case, for the purposes of subsections 91(1) to 91(4) and sections 95 and 233.4,

    • (i) the trust shall, with respect to any beneficiary under the trust the fair market value of whose beneficial interest in the trust is not less than 10% of the total fair market value of all beneficial interests in the trust, be deemed to be a non-resident corporation that is controlled by the beneficiary,

    • (ii) the trust shall be deemed to be a non-resident corporation having a capital stock of a single class divided into 100 issued shares, and

    • (iii) each beneficiary under the trust shall be deemed to own at any time the number of the issued shares that is equal to the proportion of 100 that

      • (A) the fair market value at that time of the beneficiary’s beneficial interest in the trust

      is of

      • (B) the fair market value at that time of all beneficial interests in the trust.

• Marginal note:Rights and obligations

  (2) Where paragraph 94(1)(c) is applicable to a trust, each person described in clause 94(1)(b)(i)(A) or 94(1)(b)(i)(B) shall jointly and severally with the trust have the rights and obligations of the trust by virtue of Divisions I and J and shall be subject to the provisions of Part XV, but no amount in respect of taxes, penalties, costs and other amounts payable under this Act shall be recoverable from any such person except to the extent of

  • (a) amounts paid to the person by the trust or the payment of which from the trust the person is entitled to enforce; and

  • (b) amounts received by the person on the disposition of an interest in the trust.

• Marginal note:Deduction in computing taxable income

  (3) In computing the amount of taxable income of a trust to which paragraph 94(1)(c) applies for any taxation year, there may be deducted such portion of the amount that would, but for this subsection, be included in computing the taxable income of the trust for the year by virtue of clauses 94(1)(c)(i)(B) and 94(1)(c)(i)(C) as may reasonably be considered as having become an amount payable in the year within the meaning of subsection 104(24) to a beneficiary.

• Marginal note:Deduction from foreign accrual property income

  (4) In computing the foreign accrual property income of a trust to which paragraph 94(1)(d) applies for any taxation year, there may be deducted such portion of the amount that would, but for this subsection, be the foreign accrual property income of the trust as may reasonably be considered as having become an amount payable in the year within the meaning of subsection 104(24) to a beneficiary.

• Marginal note:Adjusted cost base of capital interest in trust

  (5) In computing, at any time in a taxation year, the adjusted cost base to a taxpayer resident in Canada of a capital interest in a trust to which paragraph 94(1)(d) applies,

  • (a) there shall be added any amount required by subsection 91(1) or 91(3) to be included in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been so required to be included but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest; and

  • (b) there shall be deducted any amount deducted by the taxpayer by reason of subsection 91(2) or 91(4) in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been so deductible by the taxpayer but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest.

• Marginal note:Where financial assistance given

  (6) For the purposes of paragraph 94(1)(b), a trust or a non-resident corporation shall be deemed to have acquired property from any person who has given a guarantee on its behalf or from whom it has received any other financial assistance whatever.

• (7) [Repealed, 1994, c. 7, Sch. VIII, s. 39(1)]