November 22, 1988
HEAD OFFICE Financial Industries Division R. Nanner (613) 957-3494
This is in response to your memorandum of October 24, 1988 concerning the income tax treatment of the interest earned by a "Training Trust" and whether such a trust is required to file an income tax return.
As the sole purpose of a training trust (as proposed by the Employment and Immigration Commission of Canada) is the training of the employees of an employer, the training trust would not be considered an employee benefit plan ("EBP") by virtue of paragraph (d) of the definition of the term EBP in subsection 248(1) of the Act. In our view such a trust would be provided tax treatment similar to the one accorded to health and welfare trusts. Such treatment would suggest that the trust would be subject to Part I tax on its income as an inter vivos trust and it would be required to file an income tax return by virtue of subsection 150(1) of the Act.
With respect to the comments on tax implications in the above situation by Employment and Immigration Commission, we have been unable to determine the basis of their analysis and whether they ever liased with Revenue Canada, Taxation to arrive at their conclusions.
We hope these comments are of assistance to you.
Wayne Douglas Chief Deferred Income Plans & Trusts Section Financial Industries Division Rulings Directorate