Canada’s income tax system is based on the concept of residency - a taxpayer’s residency will govern the extent of Canada’s jurisdiction to tax. As with individuals, trusts that are resident in Canada are taxed on their worldwide income, whereas non-resident trusts, with certain exceptions, are generally exempt from Canadian income tax. The Canadian government, however, has introduced new legislation (the "new rules") that, if enacted, will expand the rules under which non-resident trusts will be deemed resident in Canada for income tax purposes.

type Tax Alert – Special Feature, Fall 2001: New Legislation on the Canadian Income Taxation of Non-Resident Trusts