(a) January 1 effective date of deemed residency
A person who had contributed property to a non-resident trust becomes resident upon immigrating to Canada.
CRA confirmed that the trust is deemed resident in Canada by virtue of s. 94(3)(a) as of January 1 of the taxation year in which the contributor immigrated to Canada. Under s. 94(3)(a), if there is a resident contributor to a non-resident trust that is not an exempt trust at a specified time in a taxation year, the trust is deemed to be resident in Canada throughout the year. “Resident contributor” per s. 94(1) is “a person that is, at that time, resident in Canada and a contributor to the trust”.
A contributor itself is defined as “a person (other than an exempt person but including a person that has ceased to exist) that, at or before that time, has made a contribution to the trust.” When that particular individual has previously contributed property to that trust, he will be a contributor and, as that contributor has now immigrated, he will be a resident contributor. Thus, the non-resident trust will be deemed to be resident in Canada throughout the taxation year.
(b) Non-resident trust can be retroactively (going back 5 years) deemed to have been resident in Canada if a non-resident contributor immigrates
A non-resident trust has resident beneficiaries with a current potential entitlement to receive income or capital and its contributor had made a contribution to the trust less than 60 months before becoming resident.
CRA indicated that in light inter alia of the lookback rule in s. 94(10), the trust is deemed to be resident for the five taxation years before the taxation year in which the individual became resident in Canada. Thus, the trust will be subject to interest and late-filing penalties for failure to have filed T3 returns (reporting its income for those years) and (where applicable) T1135 or T1134 returns for those years.
In addition to illustrating the above propositions with an example involving "Mr. X," CRA indicated that where the contributor was not a non-resident for 60 months prior to making the contribution (i.e., in a second example, Mr. Z became a non-resident in 2010 and made the contribution in 2013, before becoming resident again in 2018), the non-resident trust would be deemed to be resident in Canada by virtue of subsection 94(3) commencing in the taxation year during which the contributor made the contribution to the non-resident trust (i.e., 2013).