Dear Sirs:
Re Canada-Barbados Income Tax Agreement, Meaning of the term "individual"
This is in reply to your letter of August 12, 1991 in which you requested confirmation that a trust is not an individual for purposes of paragraph 5 of Article XIV of the Canada-Barbados Income Tax Agreement (the Treaty )
The term "individual" is not defined in the Treaty. We can, therefore, in accordance with paragraph 2 of Article 111 of the Treaty, look to the Income Tax Act (the Act) for its and other relevant definitions. Pursuant to subsection 248(1): "individual" means a person other than a corporation; "person", or any word or expression descriptive of a person, includes any body corporate or politic, and the heir, executors, administrators or other legal representatives of such person;..., "trust" has the meaning assigned by subsection 104(1) Subsection 104(1) of the Act indicates that, in the Act, a reference to a "trust" shall be read as a reference to, inter alia, the trustee having ownership or control of the trust property. Webster's Dictionary defines "trustee" as a natural or legal person to whom property is being legally committed to be administered for the benefit of a beneficiary. Based on the foregoing definitions, it is our opinion that for purposes of the Act a trust is a person and thus an "individual." In addition, it is our view that the term "individual" as defined in the Act includes a natural or legal person other than a corporation.
With respect to subsection 104(2), we do not agree that it suggests that a trust is not a person. Pursuant to subsection 104(2) a trust shall be deemed to be in respect of trust property an individual. It is our view that the intention of the subsection is to ensure that, for the purposes of the Act, a trust is taxed as an individual in respect of its property
and thus the deeming rule in subsection 104(2) does not have the effect of changing the meaning of the term "individual" as defined in subsection 248(1) of the Act.
In the context of the Treaty, Article III defines "person" to include an individual... a trust... and any other body of persons. This is consistent with our view that for purposes of the Act the term "individual" includes a natural or legal person other than a corporation and that a trust is a person. Furthermore, absent a definition of the term "individual" in the Treaty, the specific wording of paragraph 5 of Article XIV (to levy according to its domestic law) suggests that "individual" has the meaning determined under the Act.
In conclusion, it is our view that the term "individual" as used in the Treaty can include a natural or legal person other than a corporation. Therefore, for purposes of paragraph 5 of Article XIV, a trust is an individual.
We trust that our comments will be of assistance to you.
Yours truly,
Reorganizations And Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch