The new rules governing non-resident trusts and foreign investment entities will soon be introduced in the House of Commons, says a senior official with the federal Department of Finance.

“We’re going to try and get the bill introduced before the House rises, says Jerry Lalonde, assistant director of Finance’s tax legislation division. Lalonde made the comments today in Montreal at the Canadian Tax Foundation’s 55th annual conference.

The legislation is expected to pass before the next tax season, so that non-resident trusts will have to file tax returns using the new rules next spring.

Many tax practitioners are complaining that the new rules are hopelessly complex. Prior to Lalonde’s announcement there was speculation among the tax community that the proposed legislation would be revised to lessen the complexity.

Under the old non-resident trust legislation, Ottawa made a distinction between discretionary trusts and fixed-interest trusts. The former were “deemed resident”, says Stephen Bowman a tax lawyer with Thorsteinssons in Toronto. Under the new legislation, he says, there is no such distinction. There is “deemed residency for all.”

The trusts will also be taxed on all worldwide income, not just foreign property income or income earned in Canada.

One of the new rules says that an NRT can be taxed even if all of the beneficiaries are not resident in Canada. As long as only one of the contributors to the trust is resident in Canada, the trust is potentially liable for paying Canadian taxes. And now contributors, as well as beneficiaries, will be held personally liable for a trust’s unpaid tax.

The new rules “are endlessly complicated,” says Bowman. “They are astonishingly broad and unpredictable in application,” he says, adding that “it’s only a matter of time before these rules will come up and bite you” and your client. There are some exclusions from tax, he says, but they are limited.

Due to the number of ways that an NRT can be taxed, Bowman says that advisors and their clients face much more exhaustive searches into all the contributors, beneficiaries and transactions connected to it.