14 February 2000 External T.I. 1999-0012585 - Fiscal period Non-resident Corporation

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:

1. You have asked us if the corporation choose to submit its accounts for Canadian tax purposes with a fiscal period ending on December 31, will the inaugural fiscal period of the branch be considered May to December , thus requiring a proration of capital cost allowance, or instead be considered to be January to December, that coinciding with the fiscal period of the U.S. corporation for U.S. purposes ?

2. You have asked whether the fiscal period of a branch operation must necessarily coincide with the fiscal period of the U.S. Corporation for U.S. purposes.

Position:

1. As the U.S. corporation was in existence in January and provided that it has not filed a tax return in Canada for any previous taxation year, the corporation may select January as the start of its fiscal period. Our view is that the inaugural fiscal period of the U.S. corporation for Canadian tax purposes would be considered to be January to December if the corporation chooses that period and that the proration rule of capital cost allowance would not apply.

2. Under the provisions of subsection 249.1(1) of the Act, a non-resident corporation which commenced business operations in Canada through a branch is permitted to select a fiscal period for Canadian tax purposes different from that being used by the corporation for reporting purposes in a foreign jurisdiction.

Reasons:

XXXXXXXXXX 5-993005

Attention: XXXXXXXXXX

February 14, 2000

Dear Sir/Madam:

Re: Fiscal period of the Canadian branch operations of a non-resident corporation

This is in reply to your letter dated November 11, 1999 wherein you requested the Canada Customs and Revenue Agency (CCRA)'s view as to the application of the definition of "fiscal period" contained in subsection 249.1(1) of the Income Tax Act (the "Act") in a situation where a U.S. corporation with a calendar fiscal period for U.S. purposes commences business in Canada on May 1.

Your first question deals with the beginning of the fiscal period and the application of subsection 1100(3) of the Income Tax Regulations. You have asked us if the corporation chooses to submit its accounts for Canadian tax purposes with a fiscal period ending on December 31, will the inaugural fiscal period of the branch be considered May to December, thus requiring a proration of capital cost allowance, or instead be considered to be January to December, that coinciding with the fiscal period of the U.S. corporation for U.S. purposes ?

As the U.S. corporation was in existence in January and provided that it has not filed a tax return in Canada for any previous taxation year, the corporation may select January as the start of its fiscal period. Our view is that the inaugural fiscal period of the U.S. corporation for Canadian tax purposes would be considered to be January to December if the corporation chooses that period and that the proration rule of capital cost allowance would not apply.

In your second question, you have asked whether the fiscal period of a branch operation must necessarily coincide with the fiscal period of the U.S. Corporation for U.S. purposes.

Under the provisions of subsection 249.1(1) of the Act, a non-resident corporation which commenced business operations in Canada through a branch is permitted to select a fiscal period for Canadian tax purposes different from that being used by the corporation for reporting purposes in a foreign jurisdiction.

As indicated in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996, this opinion is not a ruling and accordingly, is not binding on the CCRA.

We trust our comments will be of assistance to you.

Yours truly,

Marc Vanasse, CA
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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