Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: reports of loss of tax revenue from the emigrant of a trust
Position: referred to draft legislation which proposes to ensure that all persons, including trusts, who leave Canada or transfer property from Canada, will realize a deemed disposition at the time of departure (with exceptions for Canadian real estate and Canadian business property which is taxed when sold)
Reasons: House of Commons Standing committee report of Set 18, 1996; draft legislation on migration dated Dec 17, 1999
Signed on July 4, 2000
XXXXXXXXXX
Dear Colleague:
Thank you for your letter of March 21, 2000, concerning the issue of taxation of property when the owner leaves Canada, raised by your constituent, XXXXXXXXXX.
The confidentiality provisions of the Income Tax Act preclude me from discussing specific cases of taxation. However, be assured that this issue has been and will continue to be given due consideration by the Department of Finance.
Generally, the Act currently provides that any person residing in Canada who owns taxable Canadian property may leave Canada without having to pay tax on this type of property at the time of departure. However, when the former resident sells the taxable Canadian property, any capital gain realized on the sale is subject to tax in Canada, unless this law is affected by a tax treaty between Canada and the new country of residence.
The concern raised by XXXXXXXXXX is one of several tax policy issues raised in the Auditor General's 1995 report. Those issues were considered by the House of Commons Standing Committee on Finance in its report released on September 18, 1996. Even though the committee found that the specific cases referred to in the Auditor General's report were dealt with in accordance with the existing provisions of the Act, it recommended that the Act be amended to address the tax policy issues.
The Department of Finance responded to those recommendations on October 2, 1996, by announcing draft amendments to the Act, which, when enacted, will be effective as of that date. As a result, all persons who leave or transfer property from Canada will pay tax on most capital gains that have accrued in Canada up to the time of departure. Exceptions to this rule will include gains that accrue on Canadian real estate and Canadian business property, which can always be taxed when they are ultimately sold. On December 23, 1998, the Honourable Paul Martin, Minister of Finance, released detailed proposals to implement the draft amendments announced on October 2, 1996. Revised proposals were released on December 17, 1999, reflecting further changes, which the Minister of Finance announced on September 10, 1999.
The court case your constituent referred to involves one individual's court challenge regarding the tax affairs of another. On December 31, 1998, the Trial Division of the Federal Court granted this individual standing for the court action. The Government has appealed based on the fundamental questions this decision raises concerning the confidentiality of taxpayers' affairs. As this matter is still before the Federal Court of Appeal, I cannot comment further.
I trust my comments will assist you in replying to your constituent.
Yours sincerely,
Martin Cauchon