Supreme Court of Canada: Management and Control Residency Test for Trusts

The Supreme Court of Canada (SCC) released its unanimous decision in a case involving how a trust’s residency for tax purposes should be determined. The court held that the principal basis for imposing income tax in Canada is residency.  As with corporations, the residence of a trust should be determined by the principle that a trust resides for the purposes of the Income Tax Act where its real business is carried on, which is where the central management and control of the trust actually takes place.  The residence of the trust is not always that of the trustee.  It will be so where the trustee carries out the central management and control of the trust where the trustee is resident.  Here, however, the trusts are resident in Canada, since the central management and control of the trusts was exercised by the main beneficiaries in Canada and the trustee’s limited role was to provide administrative services and it had little or no responsibility beyond that.
Fundy Settlement v. Canada, [2012] SCC 14
1) Many Canadian residents will have to rethink their estate plan.
2) Attention if there are ties to other jurisdictions, e.g. under German law the income of the trust is generally attributed to the income of the settlor or the beneficiary. Transfer to a trust may be taxed as a gift.

Rate this article
0 Rates (0 %)

Do You have any Questions?

We look forward to assisting you. For the sake of simplicity and efficiency, we request that you use our contact form for your inquiry and describe the matter as clearly as possible. In addition, you can include relevant attachments. After submitting your inquiry, we will contact you either by telephone or e-mail within 2 working days. If we can assist, we will suggest a time and date for an initial consultation. Of course, you can also contact this firm or a particular attorney directly to make an appointment for a personal consultation or telephone consultation (find contact details here). Please be advised that no attorney-client relationship is created by sending us an email or filling out this contact form. For information on our fees, please click here.