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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether for purposes of Regulation 4802(c) a corporation must be incorporated under a Special Legislative Act or whether it can be incorporated under the Business Corporations Act.
Position TAKEN:
Must be established or arise as a result of a specific or special Act of a province to qualify.
Reasons FOR POSITION TAKEN:
Provision specifically refers to an act of a province.
940417
XXXXXXXXXX W.P. Guglich
Attention: XXXXXXXXXX
September 29, 1994
Dear Sirs:
Re: Section 4802 of the Income Tax Regulations (the "Regulations")
This is in reply to your letter of February 16, 1994 wherein you requested confirmation of your interpretation regarding section 4802 of the Regulations.
In your letter you have outlined what appears to be an actual fact situation related either to a past transaction or to an actual proposed transaction. If the situation described relates to an actual transaction which has already been implemented, the review of such transactions falls within the responsibility of District Taxation Offices and it is the practice of this Department not to comment on such transactions when the identities of the taxpayers are not known. If, however, the situation described relates to an actual proposed transaction, it should be the subject of an advance income tax ruling. However, we can provide you with the following general comments.
Unless as otherwise stated all references to statute are to the Income Tax Act S.C. 1970-71-72, c.63 as amended consolidated to June 10, 1993 (the "Act").
OUR VIEWS
1.It is our view that a corporation incorporated pursuant to the Business Corporations Act of a province, rather then pursuant to a special legislative act, could not be considered, for purposes of paragraphs 4802(c) and (d) of the Regulations, to have been established by or arisen by virtue of an act of a province. It is our view that a corporation must be established or must arise by virtue of a special or specific act of a province to qualify, for purposes of paragraphs 4802(c) & (d) of the Regulations, as a "corporation established by or arising by virtue of an act of a province". And, in particular, for purposes of paragraph 4802(c) of the Regulations, to qualify, such a corporation's principal activities must be to administer, manage or invest the monies of a pension plan that is established pursuant to a specific or special act of a province or an order or regulation made thereunder.
2.The word principal is not defined in the Act but we consider the word to mean chief, main or most important. A simple percentage test of the total assets is not necessarily a conclusive factor in determining the principal activity or activities. The determinant factor is the activities of the company and not the assets held. The amount of assets or investments held may be a relevant factor in the determination.
We agree that paragraph 4802(c) of the Regulations contains no restriction on the non-principal activities of the corporation and the corporation could carry on other activities, including such as are described in paragraph (d). We also agree that the word "and" after paragraph (e) indicates that any one of (a), (b), (c), (d), (e) or (f) could qualify as a prescribed person.
3.Provided the company otherwise qualifies under Regulation 4802 the holding by the company of funds which relate to a non-principal activity would not in our view, in and by itself, adversely affect the company's status as a prescribed person.
We trust our comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch
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, 1994
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, 1994
Email this Content