What is a section 94 trust in plain terms?
It is a trust that is not resident in Canada under the ordinary tests but is treated as if it were, because of who put property into it or who can benefit from it. The trustees may all live elsewhere, the deed may be governed by foreign law, and the assets may never have touched Canada — and the trust is still brought into the Canadian tax base. The label matters because it changes the question from whether Canada can tax a distribution to whether Canada taxes the trust's income as it arises, year by year, whether anything is paid out or not.
Can a trust abroad be taxed in Canada if no trustee lives here?
Yes, and that is the purpose of a deeming rule. Residence for a trust ordinarily follows where it is centrally managed, so a structure with foreign trustees would normally sit outside Canada altogether. The deeming rule overrides that result where there is a connection of the kind it describes — a contributor resident in Canada, or in some cases a resident beneficiary. Once it applies, the trust is a Canadian taxpayer for that year with the filing obligations of one, whatever the trustees understood their position to be when they accepted office.
Does a Canadian beneficiary make a foreign trust resident in Canada?
It can, and that is the version people are least prepared for, because a beneficiary usually had no say in how the trust was set up or funded. Whether a resident beneficiary is enough depends on the rest of the structure, particularly whether anyone connected with it has been resident in Canada and what was contributed. It is worth settling early. A beneficiary who moves to Canada can change the trust's position from the date of the move, and trustees living in another country will not know unless somebody tells them.
We set up the trust before moving to Canada — does the rule still apply?
The timing of the contribution and the timing of residence are separate facts, and the rule looks at both. A trust funded long before anyone became resident in Canada is not automatically outside it, because what matters is the state of affairs in the year being tested rather than the intention at the outset. The rules do make allowance for people who have only recently become resident, measured in years of residence rather than by intention. Establishing the date each person became resident, and the date and form of each contribution, is the first piece of work on any such file.
What has to be filed for a trust deemed resident in Canada?
A trust deemed resident files as a Canadian trust: a return for the year, income computed under Canadian rules, and statements for amounts paid or credited to beneficiaries. The complication is that the accounts were probably prepared for the country the trust actually sits in, on a different year end and a different basis, so the work is one of translation before it is one of filing. Foreign tax already paid on the same income has to be claimed, and the claim needs the foreign assessments and proof of payment rather than a statement that tax was paid abroad.
Does a tax treaty stop a trust being deemed resident in Canada?
Not usually in the way people hope. A treaty allocates taxing rights between two states and can relieve double taxation on particular kinds of income, but it does not generally undo a domestic deeming rule that makes a trust a taxpayer in the first place. The more productive question is where the same income is in fact taxed twice, which article addresses that item, and whether the two countries even agree about the year. Answering it takes the trust deed, the accounts and both sets of assessments side by side.
Is double taxation legal?
Yes. Nothing prevents two countries from taxing the same income under their own domestic law — each is exercising its own jurisdiction. What treaties and credit systems do is relieve the outcome rather than prohibit the charge, and relief is generally something you must claim on a return or a form, not something applied automatically. Miss the claim and the double charge stands. Double taxation explains the mechanism.
I work remotely from another country for a company back home — who taxes me?
Usually the country you are physically in, because employment income is generally sourced where the work is done, with your residence country taxing it as well if you are resident there and giving credit. Three things follow: your employer may acquire withholding and social security obligations where you sit, a treaty tie-breaker may be needed if both countries call you resident, and a short trip that becomes a long stay can cross a residence threshold nobody was watching. See remote workers and digital nomads.
