Income Tax Act

Version of section 233.2 from 2004-08-31 to 2013-06-25:

Marginal note:Definitions
  •  (1) The definitions in this subsection apply in this section.

    exempt trust

    fiducie exonérée

    exempt trust means

    • (a) a trust that is governed by a foreign retirement arrangement;

    • (b) a trust that

      • (i) is resident in a country under the laws of which an income tax is imposed,

      • (ii) is exempt under the laws referred to in subparagraph (i) from the payment of income tax to the government of that country,

      • (iii) is established principally in connection with, or the principal purpose of which is to administer or provide benefits under, one or more superannuation, pension or retirement funds or plans or any funds or plans established to provide employee benefits, and

      • (iv) is either

        • (A) maintained primarily for the benefit of non-resident individuals, or

        • (B) governed by an employees profit sharing plan; or

    • (c) a trust

      • (i) where the interest of each beneficiary under the trust is described by reference to units, and

      • (ii) that complies with prescribed conditions. (fiducie exonérée)

    specified beneficiary

    bénéficiaire déterminé

    specified beneficiary at any time under a trust means

    • (a) any person beneficially interested in the trust who is not at that time

      • (i) a mutual fund corporation,

      • (ii) a non-resident-owned investment corporation,

      • (iii) a person (other than a trust) all of whose taxable income for the person’s taxation year that includes that time is exempt from tax under Part I,

      • (iv) a trust all of the taxable income of which for its taxation year that includes that time is exempt from tax under Part I,

      • (v) a mutual fund trust,

      • (vi) a trust described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1),

      • (vii) a registered investment,

      • (viii) a trust in which all persons beneficially interested are persons described in subparagraphs (i) to (vii),

      • (ix) a particular person who is beneficially interested in the trust solely because the particular person is beneficially interested in an exempt trust or a trust described in this subparagraph or any of subparagraphs (iv) to (vi), nor

      • (x) a particular person who is beneficially interested in the trust only because of a right that is subject to a contingency, where at that time the identity of the particular person as a person beneficially interested in the trust is impossible to determine; or

    • (b) any person described at that time in any of subparagraphs (a)(i) to (x) who is beneficially interested in the trust, where it is reasonable to consider that the person became beneficially interested in the trust as part of a transaction or event or series of transactions or events one of the purposes of which is to limit the reporting in respect of the trust that would, but for this paragraph, be required under subsection (4). (bénéficiaire déterminé)

    specified foreign trust

    fiducie étrangère déterminée

    specified foreign trust at any time means a trust (other than an exempt trust) that is non-resident at that time where either

    • (a) there is a specified beneficiary under the trust who at that time

      • (i) is resident in Canada,

      • (ii) is a corporation or trust with which a person resident in Canada does not deal at arm’s length, or

      • (iii) is a controlled foreign affiliate of a person resident in Canada; or

    • (b) at that time the terms or conditions of the trust or any arrangement in respect of the trust

      • (i) permit persons (other than persons described in any of subparagraphs (a)(i) to (viii) of the definition specified beneficiary) who are not beneficially interested in the trust at that time to become, because of the exercise of any discretion by any person or partnership, beneficially interested in the trust after that time, or

      • (ii) allow property to be distributed, directly or indirectly, to another trust that immediately after the receipt of the distribution can reasonably be expected to be a specified foreign trust. (fiducie étrangère déterminée)

  • Marginal note:Non-arm’s length indicators

    (2) For the purpose of this section,

    • (a) a non-arm’s length indicator applies to a trust at a particular time with respect to a transfer of property made at an earlier time to the trust or a corporation where

      • (i) immediately after the earlier time the transferor was

        • (A) a specified beneficiary under the trust,

        • (B) a person related to a specified beneficiary under the trust,

        • (C) an uncle, aunt, nephew or niece of a specified beneficiary under the trust, or

        • (D) a trust or corporation that had, directly or indirectly in any manner whatever, previously acquired the transferred property from a person described in clause 233.2(2)(a)(i)(A), 233.2(2)(a)(i)(B) or 233.2(2)(a)(i)(C),

      • (ii) the fair market value at the earlier time of the transferred property was greater than the amount, if any, by which

        • (A) the total fair market value at the earlier time of the consideration, if any, given to the transferor for the transfer of property at the earlier time

        exceeds

        • (B) the portion of the total described in clause 233.2(2)(a)(ii)(A) that is attributable to the fair market value of an interest as a beneficiary in the trust or a share or debt issued by the corporation,

      • (iii) the consideration received by the transferor in respect of the transfer included indebtedness on which

        • (A) interest was not charged in respect of a period that began before the particular time,

        • (B) interest was charged in respect of a period that began before the particular time at a rate that was less than the lesser of

          • (I) the prescribed rate that was in effect at the earlier time, and

          • (II) the rate that would, having regard to all the circumstances, have been agreed on at the earlier time between parties dealing with each other at arm’s length,

        • (C) any interest that was payable at the end of any calendar year that ended at or before the particular time was unpaid on the day that is 180 days after the end of that calendar year, or

        • (D) the amount of interest that was payable at the end of any calendar year that ended at or before the particular time was paid on or before the day that is 180 days after the end of that calendar year and it is established, by subsequent events or otherwise, that the payment was made as part of a series of loans or other transactions and repayments,

      • (iv) the property transferred was a share of the capital stock of a corporation or an interest in another trust and a specified beneficiary under the trust is related to the corporation or the other trust or would be so related if paragraph 80(2)(j) applied for the purposes of this subparagraph, or

      • (v) the transfer was made as part of a series of transactions or events one of the purposes of which was to avoid the application of this paragraph; and

    • (b) a non-arm’s length indicator applies to a trust at a particular time with respect to a loan made at an earlier time where

      • (i) interest was not charged on the loan in respect of a period that began before the particular time,

      • (ii) interest was charged on the loan in respect of a period that began before the particular time at a rate that was less than the lesser of

        • (A) the prescribed rate that was in effect at the earlier time, and

        • (B) the rate that would, having regard to all the circumstances, have been agreed on at the earlier time between parties dealing with each other at arm’s length,

      • (iii) any interest on the loan that was payable at the end of any calendar year that ended at or before the particular time was unpaid on the day that is 180 days after the end of that calendar year,

      • (iv) the amount of interest on the loan that was payable at the end of any calendar year that ended at or before the particular time was paid on or before the day that is 180 days after the end of that calendar year and it is established, by subsequent events or otherwise, that the payment was made as part of a series of loans or other transactions and repayments, or

      • (v) the loan was made as part of a series of transactions or events one of the purposes of which was to avoid the application of this paragraph.

  • Marginal note:Partnerships

    (3) For the purpose of this section, where property is transferred or lent at any time by a partnership, the property is deemed to have been transferred or lent at that time by each of the members of the partnership.

  • Marginal note:Filing information on specified foreign trusts

    (4) Where

    • (a) at any time (in this subsection referred to as the “transfer time”) before the end of a trust’s taxation year (in this subsection referred to as the “trust’s year”), property was transferred or lent, either directly or indirectly in any manner whatever, by any person (in this subsection referred to as the “transferor”) to

      • (i) the trust, or

      • (ii) a corporation that, at the transfer time, would have been a controlled foreign affiliate of the trust if the trust had been resident in Canada,

    • (b) the trust was a specified foreign trust at any time in the trust’s year, and

    • (c) a non-arm’s length indicator applied to the trust at the end of the trust’s year in respect of the transfer or loan,

    the following rules apply:

    • (d) where the transferor is resident in Canada at the end of the trust’s year, the transferor shall make an information return in respect of the trust’s year in prescribed form and file it with the Minister on or before the transferor’s filing-due date for the transferor’s taxation year that includes the end of the trust’s year, and

    • (e) where

      • (i) the transferor was, at the transfer time, a corporation that would have been a controlled foreign affiliate of a particular person if the particular person had been resident in Canada, and

      • (ii) the particular person is resident in Canada at the end of the trust’s year,

      the particular person shall make an information return in respect of the trust’s year in prescribed form and file it with the Minister on or before the filing-due date for the particular person’s taxation year that includes the end of the trust’s year.

  • Marginal note:Joint filing

    (5) Where information returns in respect of a trust’s taxation year would, but for this subsection, be required to be filed under subsection 4 by a particular person and another person, and the particular person identifies the other person in an election filed in writing with the Minister, for the purposes of applying this Act to the particular person

    • (a) the information return filed by the other person shall be treated as if it had been filed by the particular person;

    • (b) the information required to be provided with the return by the particular person shall be deemed to be the information required to be provided by the other person with the return;

    • (c) the day on or before which the return is required to be filed by the particular person is deemed to be the later of the day on or before which

      • (i) the return would, but for this subsection, have been required to have been filed by the particular person, and

      • (ii) the return is required to have been filed by the other person; and

    • (d) each act and omission of the other person in respect of the return is deemed to be an act or omission of the particular person.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1997, c. 25, s. 69;
  • 1998, c. 19, s. 232.
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