Generally, the test applied to determine the residency of a trust is where its “central management and control” is located.
The Newfoundland Supreme Court rendered a decision which recognizes the reality of the “trust” relationship.
In Discovery Trust v. Minister of National Revenue, the trust filed its 2008 return indicating it was a resident of Alberta rather than Newfoundland. This declaration saved approximately $9 million in tax.
The CRA conducted an audit on the basis that the “management and control” of Discovery Trust continued to be exercised in Newfoundland, even after a trustee was an appointment in 2006.
The Court analyzed the residency by examining each action taken by Discovery Trust and ultimately vacated the reassessment. It was not prepared to find that the trustee gave up management and control in the context of a fairly typical case where the trustee appears to have discharged its duties prudently and in accordance with its fiduciary obligations and commercial reality.