Publication
title
Federal government announces moratorium on providing advance income tax rulings on flow-through structures, including income trusts
DATE
September 20, 2005
EXPERTISE
On September 8, 2005, the federal government issued a paper and launched consultations with the public on the tax treatment of income trusts. Yesterday, the federal government announced that it would postpone providing advance income tax rulings on flow-through structures, including income trusts. We have confirmed with officials at the Canada Revenue Agency that this moratorium extends to all rulings sought in respect of income trusts, including those submitted prior to the announcement.
This moratorium will directly impact income trust conversions which have unusual features in respect of which a ruling would be required. However, it should be noted that most income trust conversions proceed without a ruling.
The federal government has suggested that the moratorium is necessary to protect the integrity of its income trust consultation process. However, this announcement is consistent with the view that the government is contemplating amendments to the tax regime to reconcile the difference in tax treatment between corporations and income trusts.
Consequently, while it will have no immediate effect on existing income trusts, and little effect on proposed income trusts (except in the limited number where rulings are required), the moratorium is a "shot across the bow" which signals the need for prudence until the federal government's intentions become clear.
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Alexis-François Charette
Montréal
514.847.4901
afcharette@ogilvyrenault.com
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Adrienne F. Oliver
Toronto
416.216.1854
aoliver@ogilvyrenault.com
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Ava G. Yaskiel
Toronto
416.216.3902
ayaskiel@ogilvyrenault.com
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Richard S. Sutin
Toronto
416.216.4821
rsutin@ogilvyrenault.com
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Francis R. Legault
Montréal
514.847.4495
flegault@ogilvyrenault.com
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