The measures reflect concerns regarding the increasing use of offshore structures by high-income individuals. Also, distributions by an NRT out of previously untaxed accumulated income are subject to tax.
Finance plans to release further details, followed by a consultative process and draft legislation.
The rules are effective for taxation years commencing after 2000, and for taxation years commencing after 1999 for acquisitions of an FIF interest, or transfers or loans made to an NRT, on or after budget date. FIFs and NRTs established in the United States are generally exempt. A five-year exemption may apply for temporary residents and immigrants. Other exemptions apply, and additional exemptions may be considered for bona fide investments that are not tax-motivated. Under current law, it may be possible to circumvent Canadian taxation by interposing other NRTs and foreign corporations as part of the structure.