Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether a U.S. resident corporation can assign its anticipated large T2 refund. XXXXXXXXXX .
Position: A refund may be assigned at the discretion of the Minister, but, in this case, it is unlikely to
Reasons: The size of the refund XXXXXXXXXX may warrant an in-depth review prior to the issuance of the refund which would entail delay. An option to overcome XXXXXXXXXX delay concerns would be to issue the refund to the corporation's legal counsel under an escrow agreement pending the issuance of a clearance certificate.
MEMORANDUM-TO-FILE
File Number: 2009-032251
Date: May 20, 2009
Subject: Assignment of a T2 Refund
Author: Richard Aronoff
The CRA was contacted by the legal counsel (XXXXXXXXXX) on behalf of an unnamed U.S. resident corporation (USCo). The facts presented are that USCo will be filing a T2 return claiming a large income tax refund. USCo has no permanent establishment or employees in Canada. It did not carry on business in Canada. It did, however, dispose of the shares of a Canadian resident company (CanCo) at a large profit and withholdings were made pursuant to Part XIII, ITA. It is this withheld amount that USCo wants refunded.
XXXXXXXXXX . Its legal counsel would like to know if direction can be given to the CRA to have the refund cheque made payable to a third party.
The response provided by telephone to XXXXXXXXXX is that, pursuant to subsections 220(6) and (7) ITA, a refund can be assigned, but, the assignment is not binding on the Minister. Further, as the amount of the refund is represented to be large, the CRA may, as part of its administrative procedures, wish to conduct an in-depth review the company's T2 return before issuing the refund. One option to consider, XXXXXXXXXX , would be for the refund to be assigned to USCo's legal counsel - XXXXXXXXXX - under an escrow agreement. Once the CRA were to issue a clearance certificate pursuant to subsection 159(2) ITA, the funds could be released by the law firm as instructed by its client.
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