New Requirements for obtaining s.116 Clearance Certificate
In a bit of a departure from recent blogs, today's blog is less of an opinion piece and simply an update for practitioners that has been brought to my attention. Distributions to non-resident beneficiaries of Canadian estates and trusts have long been subject to sec.116 of the Income Tax Act. However in a change to its procedure that is certain to create further delay in obtaining a s.116 clearance certificate, the Canada Revenue Agency (CRA) has recently announced that any non-resident beneficiary must be assigned an Individual Tax Number, a Canadian Social Insurance Number, or a Temporary Taxation Number, before such clearance certificate will be issued. Apparently, the Auditor- General had made this one of her recommendations in her annual report. Taking the Individual Tax Number as an example, the typical waiting period for such a number (after all paperwork has been filed) has historically been approximately 120 days. The one silver lining is that, if a non-resident benficiary is assigned an Individual Tax Number for an initial distribution, that same number should be used for any further distributions. Nonetheless, the procedure can be cumbersome in that the non-resident beneficiary must now provide CRA with certified or notarial copies of documentation evidencing his or her name, date of birth, mailing address, and residential address (if different than the mailing address). Photographic proof of identity must also be tendered. In addition, a non-resident beneficiary must provide CRA with the tax identification number assigned by the jurisdiction in which they reside for tax purposes. CRA will apparently accept the usual suspects in any attempt to prove identity: i.e. passports and birth certiciates will be the first choice but driver's licences will likely suffice to satisfy the requirement for two or more certified copies of documents evidencing identity. The relevant form to obtain an Individual Tax Number is a T1261 which can be obtained at the following link: http://www.cra-arc.gc.ca/E/pbg/tf/t1261/t1261e.pdf.
Until Tomorrow,
David
