In Canada (National Revenue) v. Morris, the Minister of National Revenue appealed a Federal Court judgment requiring it to provide the RCI Trust, a Barbados settled trust, with a written decision on whether shares sold by the trust in 2006 were treaty exempt property under the Canada-Barbados Income Tax Convention. The RCI Trust obtained the judgment on an application for judicial review of the Minister’s refusal to provide administrative relief and issue a compliance certificate under section 116 of the Income Tax Act (Canada). Section 116 imposes reporting and withholding obligations on non-residents’ dispositions of certain taxable Canadian property. Under the Minister’s published administrative policy, relief would generally be provided where a non-resident claimed a treaty exemption and provided specified documentation. The RCI Trust maintained that it had satisfied the conditions of the administrative policy and the Federal Court agreed with this position in its judgment.
The Federal Court of Appeal allowed the appeal, setting aside the Federal Court judgment and dismissing the judicial review application. It was for the Minister to determine, in the context of assessing an income tax return filed by the RCI Trust, whether the RCI Trust was resident in Barbados and whether it was entitled to treaty benefits. The Federal Court of Appeal concluded that while the Federal Court had jurisdiction to hear the judicial review application, it should not have exercised its jurisdiction since the proper recourse for the RCI Trust would have been to have the matter judicially determined by filing a 2006 income tax return and appealing the resulting assessment to Canada’s Tax Court, which has the exclusive original jurisdiction to deal with such appeals. The Court emphasized that section 116 “is a statutory device for requiring the withholding of tax at source or the provision of security, so that if a [Canadian] tax liability arises, collection is facilitated. As inconvenient and costly as that may be for the RCI Trust, that is the procedure Parliament has established, and it must be respected”.
To view the full text of the decision, please click here.