| September 25, 1990 | |
| C. Savage | Rulings Directorate |
| A/Director | G. Arsenault |
| Provincial and International | 957-2126 |
| Relations Division | |
| 7-4724 |
Subject: Privileges and Immunities (International Organizations) Act
This is in reply to your memorandum dated February 13, 1990.
We do not have sufficient information concerning the staff retirement funds or the circumstances under consideration by you in connection therewith to comment definitively as to the proper tax treatment thereof. However, we can make the following observations which hopefully will be of assistance to you:
1. In respect of a pension plan, it is generally not accurate to conclude that the assets of the fund beneficially belong to the employees. The assets of the fund may in fact be owned legally and beneficially by the employer, which may simply have a contractual obligation to provide a pension to its employees. In this case, there will likely not be a trust. Alternatively, there may be a trust and certain employees may have vested rights in respect thereof. In this case, even as to the vested rights of employees, it is probably more appropriate to consider the employees having rights under the plan and "in respect of" the assets of the fund than it is to consider the employees to be the beneficial owners of the assets of the fund.
2. At common law, a trust is not a "separate legal entity". While subsection 104(2) of the Income Tax Act provides that a trust shall for purposes of that Act be deemed to be in respect of the trust property an individual, this provision would not, in our opinion, have the effect of restricting or overriding any exemption available by virtue of the Privileges and Immunities (International Organizations) Act (the "Exempting Legislation").
3. The Exempting Legislation does not only exempt from taxation the assets and income of the exempt organization. It also specifically exempts the organization itself from taxation. Generally, as indicated by subsection 104(1), a reference to a trust is a reference to the trustee. The trustee is the taxpayer. This is because, as indicated above, a trust is not a "separate legal entity". Any assessment of a trust is an assessment of the trustee (albeit in its capacity as trustee) and is issued to and enforced against the trustee. Accordingly, if the pension plan is a trust and if the exempt organization is the trustee and if the establishment of the pension plan is permitted by the exempt organization's character and is in furtherance of its objects, we are of the view that such a pension plan trust would be exempt from tax by virtue of the Exempting Legislation.
for DirectorReorganization and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch