Does Reg. 202(1) require a Canadian-resident trust to report a capital distribution to a non-resident capital beneficiary? CRA responded:
Pursuant to subsection 202(1)…a person resident in Canada who pays, or is deemed under Part XIII of the Act to pay, an amount to a non-resident person as income of the trust, is required to file an information return on Form NR4.
Subsection 212(11)…ensures that distributions of capital of a trust are deemed to be distributions of income for the purposes of Part XIII. However, only distributions of capital described in subparagraph 212(1)(c)(ii)...will be subject to Part XIII tax, i.e., capital dividends… .
However…any distribution of capital in the trust, regardless of whether it is described in subparagraph 212(1)(c)(ii), must be reported on an NR4 form…[and] coded "S" in box 18 or 28… .