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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Bco was incorporated in XXXXXXXXXX , and was subsequently continued into Canada. Is Bco a resident of Canada for purposes of the Act and the Canada-XXXXXXXXXX Treaty?
Position: Yes
Reasons: Article XXXXXXXXXX of the Treaty states that a corporation shall be deemed to be resident of the State in which it is continued.
XXXXXXXXXX 2001-010391
XXXXXXXXXX, 2001
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX in which you ask for an advance income tax ruling on behalf of the above taxpayers.
Definitions
In this letter, the following terms have the meanings specified:
(a) "Aco" means XXXXXXXXXX.
(b) "Act" means the Income Tax Act R.S.C. 1985 c.1 (5th Supp.), as amended to the date hereof. All statute references in this letter are to the Act unless otherwise indicated.
(c) "Bco" means XXXXXXXXXX.
(d) "Cco" means XXXXXXXXXX.
(e) "Dco" means XXXXXXXXXX.
(f) "Treaty" means the Canada-XXXXXXXXXX, including protocols enacted to the date hereof.
Facts
1) Aco is a corporation incorporated under the laws of XXXXXXXXXX. The common shares in its capital stock are listed on the XXXXXXXXXX Stock Exchange. Aco is a XXXXXXXXXX corporation for XXXXXXXXXX income tax purposes, and is a resident of XXXXXXXXXX for the purposes of the Treaty. Aco and certain of its subsidiary corporations carry on the businesses of XXXXXXXXXX.
2) Bco was incorporated in XXXXXXXXXX under the laws of XXXXXXXXXX. Bco is, and at all relevant times has been, a XXXXXXXXXX corporation for XXXXXXXXXX income tax purposes, and, until XXXXXXXXXX, was a resident of XXXXXXXXXX for purposes of the Treaty. Bco has only one class of issued and outstanding shares in its capital stock, that being a class of common shares, all of which are owned by Aco.
3) Cco is a corporation incorporated under the laws of the Province of XXXXXXXXXX . Cco has only one class of issued and outstanding shares, that being a class of common shares, all of which are owned by Bco. Cco is a taxable Canadian corporation as defined in subsection 89(1). Cco's address is XXXXXXXXXX. It files its tax returns at the XXXXXXXXXX Taxation Centre, and is served by the XXXXXXXXXX Tax Services Office.
4) Dco is a "societe anonyme", incorporated under the laws of XXXXXXXXXX, and resident in XXXXXXXXXX. Shares of Dco are held by Bco. Dco is in the business of XXXXXXXXXX.
5) XXXXXXXXXX.
6) Cco has declared a cash dividend of CAN$XXXXXXXXXX payable to Bco, conditional on the receipt of this ruling. Bco, in turn, has declared a cash dividend of CAN$XXXXXXXXXX payable to Aco, conditional on the receipt of this ruling.
Proposed Transactions
7) After the receipt of this ruling, Cco and Bco will pay the dividends as set out in paragraph 6 above.
8) Bco will withhold tax under Part XIII from the dividend to Aco referred to in paragraphs 6 and 7 above pursuant to subsections 212(2) and 215(1) at the reduced rate of XXXXXXXXXX set out in paragraph XXXXXXXXXX of Article XXXXXXXXXX of the Treaty, and will remit such tax to the Receiver General by the fifteenth day of the month following the month in which the dividend was paid.
Purpose of the Proposed Transactions
The Aco group of companies, as part of its annual business planning process, regularly undertakes dividend planning for the overall group for funding and cash management purposes. The declaration and payment of the dividends as outlined in paragraphs 6 and 7 above is pursuant to the annual business planning process.
To the best of your knowledge, and that of the taxpayers, none of the issues involved in this advance income tax ruling is:
a. in an earlier Canadian federal or provincial return of Bco or Cco or a person related to either of them, except as outlined below;
b. being considered or under assessment by a Canadian federal or provincial tax services office or taxation centre in connection with a previously filed tax return of Bco or Cco or a person related to either of them, except as outlined below;
c. under objection in Canada by Bco or Cco or a person related to either of them;
d. before the courts in any Canadian jurisdiction and no judgement has been issued which may be under appeal; or
e. the subject of a ruling previously considered by the Directorate.
Bco has shown on its income tax return for its XXXXXXXXXX taxation year filed pursuant to the provision of the Act the amount of an income inclusion and deduction from taxable income for a cash dividend of XXXXXXXXXX paid by Cco to Bco in XXXXXXXXXX.
Rulings Given
Provided the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions and purpose of the proposed transactions, and provided the proposed transactions are completed in the manner described above, our rulings are as follows:
A. Bco will be deemed by paragraph 250(4)(a) by virtue of paragraph 250(5.1)(b) to have been resident in Canada for purposes of the Act throughout the taxation year in which the proposed dividends described in paragraphs 6 and 7 above are paid.
B. At the time of the payment of the proposed dividends, Bco will be deemed by paragraph XXXXXXXXXX of Article XXXXXXXXXX of the Treaty to be a resident of Canada for purposes of the Treaty.
C. Subsection 250(5) will not apply to deem Bco to not be resident in Canada at the time of the payment of the proposed dividends.
D. Bco will not be subject to Part XIII tax under subsection 212(2) on the proposed dividend received from Cco, and Cco will not be required to withhold such tax under subsection 215(1) from the payment of the proposed dividend to Bco.
E. The amount of the proposed dividend paid by Cco to Bco will be deductible in computing the taxable income of Bco under subsection 112(1) for its taxation year in which the taxable dividend is paid.
The above rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R4, dated January 29, 2001, and are binding on the Canada Customs and Revenue Agency (the "CCRA") provided that the proposed transaction is completed by XXXXXXXXXX.
Nothing in this letter should be construed as implying that the above rulings apply to any dividend received by Bco other than the dividend referred to in paragraphs 6 and 7 above.
Yours truly,
for Director
International & Trusts Division
Income Tax Rulings Directorate
The CCRA
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© Her Majesty the Queen in Right of Canada, 2001
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