Today, the Supreme Court of Canada granted leave to the taxpayer to appeal the decision of the Federal Court of Appeal in St. Michael Trust Corp., as Trustee of the Fundy Settlement v. The Queen (F.C.A., November 17, 2010). We have attached Tax News Flashes dated September 14, 2009 and November 23, 2010, in which we discuss the decisions of the lower courts in this case.
Until the St. Michael’s case, it was widely believed that under Canadian law a trust was generally resident where a majority of its trustees were resident, provided that the trustees made their decisions respecting the trust in that jurisdiction.
The decisions of the Tax Court of Canada and the Federal Court of Appeal in this case rejected that test which resulted in much uncertainty with respect to where a trust is to be considered resident for Canadian tax purposes. Both the Tax Court and the Federal Court of Appeal applied a fact based test: a trust is resident where the trust is centrally managed and controlled.
That the Supreme Court of Canada has granted leave is welcome news. Their decision in this case will establish the correct test to apply to determine where a trust is resident for Canadian tax purposes.