Principal Issues: [TaxInterpretations translation] Is a Swiss "Vested Benefits Account" pension fund, foreign property required to be reported on Form T-1135 "Foreign Income Verification Statement" under subsection 233.3(3) of the Act?
Position: Yes.
Reasons: Based on the information obtained and the wording of subparagraph 233.3(1)(n) of the definition "specified foreign property", no exemption is applicable.
XXXXXXXXXX 2010-036017 Nancy Turgeon, CGA August 12, 2010
Subject: Foreign Property Declarations
This is further to your fax of March 11, 2010, in which you requested our opinion regarding any requirement to complete Form T-1135 "Foreign Income Verification Statement".
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
The situation you indicated in your mailing appears to relate to an actual situation involving a specific taxpayer. As explained in Information Circular 70-6R5, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we are pleased to offer the following general comments which may be of assistance to you. These comments, however, may not apply to your particular situation in certain circumstances.
You raised the situation of a Canadian individual holding a pension account in Switzerland known as a "Vested Benefits Account" whose value exceeds $100,000 Canadian. According to our understanding of the facts, this is a pension mechanism provided for under the laws of that country from which retirement benefits will be paid when the individual has reached the required age and meets the other conditions set out in the Swiss Federal Law on the Occupational Old-Age, Survivors' and Disability Benefit Plans (LOB). The individual lived in that country for several years and now lives in Canada.
Our Comments
Subsection 233.3(3) of the Act requires the reporting of property owned outside Canada by certain specified Canadian entities. Specified Canadian entities are defined in paragraph 233.3(1) and generally include an individual.
However, the definition of "reporting entity" in subsection 233.3(1) also includes the concept of specified foreign property. Although it contains a series of inclusions, it also contains a series of exclusions, so as to allow the avoidance of the requirement to file this return. Paragraphs 233.3(1)(j) to (q) exclude foreign property from the required disclosure, for instance, an interest in various classes of trusts, including trusts that provide for certain annuity or pension payments. Several strict conditions must be satisfied in order for such trusts to be considered excluded foreign property. Based on the information available to us and the particular nature of the "Vested Benefits" account, it appears to us that this account would qualify as specified foreign property within the meaning of subsection 233.3(1). In addition, the account would not be excluded under paragraph 233.3(1), specifically under subparagraph 233.3(1)(n), as the arrangement would not be an interest in a trust described in paragraph (a) or (b) of the definition exempt trust in subsection 233.2(1).
Consequently, we are of the view that the "Vested Benefits" account should be reported on Form T-1135 "Foreign Income Verification Statement".
These opinions are not advance rulings and, as stated in paragraph 22 of Information Circular 70-6R5 of May 17, 2002, are not binding on us.
Best regards,
Alain Godin,
Manager
for the Director
International Operations and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.