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: Will the CRA be willing to issue a certificate pursuant to s. 116 where the shares are not considered to be taxable Canadian property?
Position: Yes
Reasons: The CRA will assume the property to be taxable Canadian property and process the request for the certificate. The CRA will not be making a determination as to whether or not the property is taxable Canadian property at the time of the s. 116 request.
2010 CTF Roundtable
Question #20 Taxable Canadian Property
With the amendment to the definition of "taxable Canadian property" in subsection 248(1), a non-resident vendor of property may be of the view that a share of a corporation (that is not excluded property) is not taxable Canadian property but, since there is no due diligence defence, a purchaser may not agree to acquire the share without withholding or a section 116 certificate.
Will CRA issue a certificate under subsection 116(2) or 116(4) even where CRA concludes that the share is not taxable Canadian property? Note that each of the foregoing subsections provides for the issue of a certificate on the disposition of "any property" even though subsections 116(1) and 116(3) dealing with applications for certificates refer only to taxable Canadian property.
CRA Response
The CRA does not review or make a determination of whether a property is taxable Canadian property in the course of processing a section 116 certificate request. Accordingly, a certificate may be issued under subsection 116(2) or 116(4) in respect of property that is not taxable Canadian property. However, as a determination is not made, the fact that the property may not be taxable Canadian property will not influence the amount that must be paid or security provided by the vendor, in order to qualify under subsection 116(2) or subsection 116(4) to receive the certificate. It will also not influence the vendor information required to be submitted.
Henry Leung
2010-038714
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2010
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2010
Email this Content