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: Does income from a business carried out under a licence granted by a province qualify under 149(1.2)
Position: No
Reasons: A licence grants the holder a right to carry on a business activity. It is not a contract for services between the holder and the grantor.
XXXXXXXXXX 991720
C. Savage
Attention: XXXXXXXXXX
June 29, 1999
Dear Sirs:
Re: Municipal Corporations
This is in your reply to your letter of June 7, 1999 wherein you requested our opinion with respect to the application of subsection 149(1.2) of the Income Tax Act (“the Act”).
You ask whether or not the fact that a corporation conducts its business pursuant to a licence granted by a province would necessarily result in the income earned being considered to be from activities carried on under an agreement in writing between the corporation and the province for the purposes of subsection 149(1.2) of the Act.
In our opinion, the answer is no. The test to be met in subsection 149(1.2) is that income must be earned from the activities described in the agreement. The term licence does not extend to a contract under which a person is entitled to remuneration for the performance of specified services. Since the corporation would not be earning income from the provision of goods or services to the province, it would not have qualifying income for the purposes of subsection 149(1.2).
We trust this will be of assistance.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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