15 August 1997 External T.I. 9638105 - SICAV - RESIDENCY FOR TREATY PURPOSES

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:

Residency Status of SICAVs for Tax Treaty Purposes

Position:

SICAVs are not residents of a Contracting State for treaty purposes. However, in the case of France, new amending Protocol will provide that SICAVs will be resident of France but only to the extent that their shareholders are liable to French tax on the income from the SICAV.

Reasons:

SICAVs are not liable to tax in their own right. Same position as for LLCs. We have already informed Luxembourg of our position.

	                            	963810
XXXXXXXXXX                             		David R. Senécal

Attention: XXXXXXXXXX

August 15, 1997

Dear Sirs:

Re: SICAVs - Canada-Luxembourg Income Tax Convention

This is in reply to your letter of May 29, 1996, wherein your requested our views as to whether certain corporate entities established in Luxembourg for investment purposes and known as "sociétés d'investissement à capital variable" (SICAVs) were covered by the provisions of the Canada-Luxembourg Income Tax Convention (the "Convention"). We apologize for the delay in responding to your enquiry.

We have informed the Luxembourg competent authority that it is our department's position that SICAVs constituted and established in Luxembourg, not being liable to taxation in that State, are not considered by this department as being residents of Luxembourg as defined in paragraph 1 of Article 4 of the Convention and are, therefore, not covered by the provisions of the Convention. As a result, the Luxembourg tax authorities have informed our department that they will not entertain requests from SICAVs for certification of their residency status for purposes of the Convention.

It should be noted that our department is also of the view that SICAVs constituted and established in France are not residents of France for purposes of the Canada-France Income Tax Convention (the "French Convention"). However, by virtue of an amending Protocol to the French Convention which was signed by Canada and the French Republic on November 30, 1995, the definition of the term "resident of a Contracting State" in paragraph 1 of Article 4 is to be expanded in a manner which will result in Canada treating SICAVs, which have their place of effective management in France, as residents of France but only insofar as their shareholders are liable to French tax on the income of the SICAVs in respect of which the benefits of the French Convention are granted. It is expected that the Protocol will enter into force sometime this year.

If you are interested, once the Protocol enters into force, we would suggest that you contact our department's International Tax Directorate regarding any administrative requirements which must be met in order for qualifying French SICAVs to benefit from the lower withholding tax rates provided for in the French Convention.

We trust that our comments will be of assistance.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch