Nortel Networks Corporation – 63
July 27, 2011
The CRA has released its Advance Income Tax Ruling (‘CRA Ruling’), which applies to distributions that are made from the Nortel HWT. To view a copy of this document please click here.
The CRA has made four separate rulings, which can be located on page 7 of the CRA Ruling. Each ruling applies to a distinct group of benefits, and therefore not all rulings will apply to you. The CRA’s four rulings are summarized as:
A. LTD Income Benefit Payments – (Not Taxable): Distributions that are made from the Nortel HWT to Disabled Employees in respect of LTD Income Benefit payments are not taxable. Any distribution paid from the Nortel HWT in respect of LTD Income Benefits will not be included in a Disabled Employee’s income for purpose of the Income Tax Act (Canada). This means that there will be no amounts related to federal income tax withheld from HWT distributions that are related to LTD Income Benefits.
B. Retiree and LTD Life Insurance – (Taxable): Distributions that are made from the Nortel HWT to Retirees and Disabled Employees in respect of a life Insurance benefit is taxable. Any distribution paid from the Nortel HWT in respect of life insurance benefits will be included in your income for the purpose of the Income Tax Act (Canada) in the year of receipt. This means that any HWT distribution you receive that is related to Retiree or LTD life insurance will be subject to federal income tax withholding.
C. Survivor Income and Survivor Transition Benefits – (Taxable): Distributions that are made from the Nortel HWT to individuals who have an entitlement to a Survivor Income Benefit or Survivor Transition Benefit are taxable. Any distribution paid from the Nortel HWT in respect of Survivor Income or Survivor Transition Benefits will be included in the recipient’s income for the purpose of the Income Tax Act (Canada) in the year of receipt. This means that any HWT distribution you receive that is related to a Survivor Income or Survivor Transition Benefits will be subject to federal income tax withholding.
D. Non-Residents of Canada: No Disabled Employee, LTD Life Beneficiary, Retired Employee or Entitled Survivor who is a non-resident of Canada will have disposed of a taxable Canadian property for income tax purposes.
Please take note that the CRA Ruling applies only to distributions that are made from the Nortel HWT. This CRA Ruling does not apply to any distribution that will be made in the future from the Nortel estate. Subsequent Advance Income Tax Rulings Requests will be submitted with the CRA, if necessary, for payments that will be made from the Nortel estate in the future.
If you are a Quebec resident, please note that a request for an advance income tax ruling has been submitted with your provincial taxing authority, Revenu Quebec, and that this ruling will also affect you. Revenu Quebec has not yet delivered its ruling and we do not know when this will occur. More information will be posted on this website once it becomes available.
You may contact Representative Counsel if you have questions after your review of the CRA Ruling.
