Principal Issues: [TaxInterpretations translation] Does the CRA agree with the position taken by the FCA in St. Michael (Garron)?
Position: General Comments.
Reasons: Appeal to the Supreme Court of Canada.
FEDERAL TAX ROUNDTABLE 7 OCTOBER 2011
2011 APFF CONFERENCE
Question 28
Criteria Determining the Residence Status of a Trust
The Federal Court of Appeal in St. Michael Trust Corp., as Trustee of the Fundy Settlement and St. Michael Trust Corp., as Trustee of the Summersby Settlement v. The Queen (Garron) ruled in 2010 that the residence of a trust is not necessarily determined by the place of residence of a majority of the trustees. In certain circumstances, the criterion of the place where decisions are made ("central management and control") could be the decisive criterion. On June 23, the Supreme Court of Canada granted the taxpayer leave to appeal that judgment.
Questions to the CRA
(a) Can the CRA indicate what criteria it currently uses to determine in which jurisdiction a trust resides?
(b) In the event that the CRA is currently applying a trust residency test based on the Federal Court of Appeal decision in Garron, can the CRA tell us what mechanism was put in place to decide, as applicable, on the question of the residence of a trust if two Canadian provinces are each of the opinion that the central management and control of the trust is undertaken in their territory? We are particularly thinking of a situation where the CRA is responsible for the tax administration of one of the provinces concerned.
CRA Response to Question 28(a)
The long-standing position of the CRA is that the determination of the residence of a trust must be made in light of all the facts of a particular situation. We refer here to Interpretation Bulletin IT-447 - Residence of a Trust or Estate, issued by the CRA on May 30, 1980.
As stated in the question, the decision of the Federal Court of Appeal in St. Michael Trust Corp. et al v. The Queen (footnote 1) was appealed to the Supreme Court of Canada and leave to appeal was granted on June 23, 2011. In accordance with the information available on the website of the Supreme Court of Canada as of the date hereof, the hearing of the case was tentatively scheduled for March 13, 2012. In those circumstances, we are of the view that it is inappropriate to issue comments on the decision of the Federal Court of Appeal.
CRA Response to Question 28(b)
There is no specific mechanism for determining the question of the residence of a trust in an interprovincial context. For the purpose of the operation of the Canadian self-assessment tax system, that is a question of fact, and not one specific to trusts. It is likely to occur with respect to any Canadian taxpayer. That question is thus generally capable of being examined and discussed between the tax administrations and the taxpayer during an audit of the taxpayer. Furthermore, an assessment issued on a position adopted by a Canadian tax authority with respect to a taxpayer's place of residence may be challenged by the taxpayer in the course of a duly filed objection in accordance with the requirements of the applicable legislation.
Yannick Roulier
(613) 957-2134
2011-041222
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 2010 FCA 309.