File: 11590-3
Dear XXXXX
I am writing in response to your memorandum dated August 9, 1995, concerning the above noted Funds.
Our understanding of your question is that you wish to know if the XXXXX are able to qualify as listed financial institutions and are thus able to register and to elect under section 150 to exempt supplies of management services from the XXXXX[.] The funds will be able to register pursuant to paragraph 240(3)(a) of the Excise Tax Act if they are found to be listed financial institutions.
Facts
• XXXXX XXXXX[.]
• XXXXX provides advisory services exclusively to its two subsidiaries; XXXXX[.]
• During 1994 with respect to advisory services from the XXXXX and XXXXX[.]
• The two subsidiaries are incorporated under the XXXXX and operate under the XXXXX as venture capital funds deriving their revenue from interest, dividends, fees, et cetera.
• All the issued and outstanding common shares of XXXXX are owned by XXXXX[.]
• XXXXX[.]
• According to the XXXXX offering memorandum, investors who subscribe for one or more bonds may qualify for Canadian permanent resident status along with their spouse and dependents. Investment is required for a minimum number of years.
Also according to the memorandum, the "main purpose of the Fund is to provide equity or loan capital to establish, purchase, or maintain eligible businesses or commercial ventures, ..."[.]
XXXXX[.]
• As established in a telephone conversation with XXXXX, on August 17, 1995, XXXXX is not and has not been charging GST on its supplies of advisory services to the funds. According to XXXXX an attempt to file a registration form and section 150 election was made in February 1994 with a XXXXX of your office. No election is currently in place. Neither are the funds currently registered.
Our Comments
XXXXX do not qualify as investment plans as defined in subsection 149(5) of the Excise Tax Act (the Act).
However, given the facts above, both XXXXX do qualify as listed financial institutions pursuant to subparagraph 149(1)(a)(viii) of the Act:
"as a person whose principal business is the lending of money or the purchasing of debt securities or a combination thereof".
XXXXX are corporations resident in Canada and are part of a closely related group. The funds are listed financial institutions and so are eligible to register under subsection 240(3), and having done so, each may elect pursuant to section 150 with XXXXX[.] If XXXXX choose to elect under section 150 please inform Darlene Wladyka, Special Sectors Division at (613) 954-7947. Special Sectors is of the opinion that this may be a violation of the Reciprocal Taxation Agreement and would like to be advised, so that they may bring this matter to the attention of Department of Finance.
Enclosed are the 1994 annual reports for XXXXX as well as the offering memorandum for XXXXX for your information. These were obtained from XXXXX for the funds. He is the new contact at the company and can be reached at XXXXX[.] If you have any further questions or concerns, please do not hesitate to contact John Nowak at (613) 952-8811.
J. Sitka
A/Director
Financial Institutions and Corporate Reorganizations
GST Rulings And Interpretations attachment
| c.c.: |
A. Venne, Director, Special Sectors |
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