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 a corporation that is for all its purposes an agent of the provincial Crown and whose property and income is deemed to be property of the Crown can have taxable income within the meaning of subsection 2(2) of the Act.
Position:
It cannot.
Reasons:
Such a corporation would not be liable to taxation, since its income would be considered to be income of the province. Such income is immune from taxation by virtue of a province's immunity from taxation with respect to lands and property (see section 125 of the Constitution Act, 1867).
5-960174
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
April 24, 1996
Dear XXXXXXXXXX:
Re: Crown Agent - Taxable Income
We are writing in reply to your letter of January 2, 1996, wherein you requested our comments regarding the application of subsection 2(2) of the Income Tax Act (the "Act") to a corporation that is, according to its enabling legislation, an agent of the Crown.
More specifically, you inquire whether a corporation that is for all its purposes an agent of the Crown and whose property, money and profits are the property of the Crown, can have taxable income within the meaning of subsection 2(2) of the Act. In your view, since the corporation in question would be both a "person" and a "taxpayer" within the meaning of subsection 248(1) of the Act, it will have taxable income if it has any income for a taxation year.
In our view, a corporation that is for all its purposes an agent of the provincial Crown and whose property and income is property of Her Majesty in right of the province would not be liable to taxation, since any income of the corporation would be considered to be income of the provincial Crown and federal taxes do not apply to the property of a provincial Crown.
On the other hand, a corporation that is not an agent of the Crown or is an agent of the Crown but for limited purposes, may nevertheless be exempt from taxation under paragraph 149(1)(d) of the Act, if not less than 90% of its shares or capital is owned by Her Majesty in right of Canada or a province or by a Canadian municipality. Since such a corporation would meet the definition of "person" and therefore, of "taxpayer" in subsection 248(1) of the Act, we agree that the corporation could have taxable income within the meaning of subsection 2(2) of the Act. However, by virtue of the preamble of subsection 149(1) of the Act, no tax is payable on the taxable income of a person for a period during which the person was one of the enumerated entities in subsection 149(1) of the Act. Therefore, although a corporation that is described in paragraph 149(1)(d) of the Act could have taxable income, no tax would be payable on its taxable income.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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