Aug 23 1991
Non-Resident Taxation Division Foreign Section
Source Deductions Programs Section K.B. Harding
(613) 957-2130Attention: J. Ivey
912029
SUBJECT: Income Payable by a Trust to Non-Resident Beneficiary
This is in reply to your Memorandum of July 22, 1991 concerning the timing of amounts payable by a trust to a non-resident beneficiary.
In our view the comments in paragraph 6 of Interpretation Bulletin IT-342R and paragraph 5 of Interpretation Bulletin IT-465R are not contradictory. Paragraph 6 merely indicates that where a beneficiary of a trust is a non-resident on the last day of the trust's taxation year the amounts required to be included in the beneficiary's income pursuant to subsections 104(13) and 105(2) of the Income Tax Act (the "Act"), if Part I were applicable, are subject to withholding tax unless exempted by other provisions of the Act. It does not indicate at what point in time the amounts are to be subject to withholding tax.
Paragraph 5, however, indicates that where income of a trust is payable to a non-resident beneficiary in a trust's taxation year, the amount that would, if Part I were applicable, be required by subsection 104(13) to be included in the non-resident beneficiary's income will be subject to withholding tax under paragraph 212(1)(c) based on the time specified in paragraph 214(3)(f).
Since paragraph 214(3)(f) of the Act deems certain amounts which are payable by a trust to non-resident beneficiaries to have been paid or credited in accordance with the rules set out therein, we are in agreement with your views that an amendment to the Act would be required in order to achieve your purposes.
We trust the above comments are adequate for your purposes.
for Director Reorganizations and Non-Resident Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
000103