There has been a one-year delay announced in the effective date for Canadian income tax proposals relating to non-resident trusts and foreign investment entities.

Draft income tax legislation to implement the proposals were released for comment last August, and originally were expected to come into effect on January 2002. Canadian Finance Minister Paul Martin noted that it was important to carefully consider the various detailed submissions received by the Department. Accordingly, the effective date for the new income tax rules was delayed by one year, generally to take effect for taxation years beginning after 2002.

The draft legislation is designed to promote tax neutrality for onshore and offshore investments, and affects many trusts in existence today. Offshore trustees, particularly those with a large number of trusts which have Canadian connections, must develop a strategy and programme as to how they will respond to these changes.

Information on the draft legislation and contact details for the Tax Legislation Division of the Department of Finance, Canada may be had from the web site link provided below.