31 October 2001 External T.I. 2001-0104765 - SUBSTANTIAL CANADIAN PRESENCE

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:

1. Whether services rendered to a subject corporation by the employees or partners of a 3rd party corporation or partnership are services of "other individuals" for the purposes of clause 206(1.1)(d)(iii)(C)?

2. Whether a registered office maintained in the office of the subject corporation's Canadian lawyer is an "office" for purposes of subparagraph 206(1.1)(d)(ii)?

Position:

1. Yes.

2. Yes, where the registered office is required by the subject corporation's constating documents.

Reasons:

1. Use of the words "other individuals" in clause 206(1.1)(d)(iii)(C) means an employer/employee relationship is not required. Only a relationship between the expenses incurred and the services provided is needed.

2. A physical address for notice or service constitutes the necessary Canadian connection in the context of subparagraph 206(1.1)(d)(ii).

XXXXXXXXXX 2001-010476
P. Kohnen, CMA
October 31, 2001

Dear XXXXXXXXXX:

Re: Request for technical interpretation - subsection 206(1.1)

This is in reply to your letter of September 27, 2001, requesting our views regarding the determination of whether a corporation has a "substantial Canadian presence" for the purposes of subsection 206(1.1) of the Income Tax Act (the "Act").

In your request, you referred to our document 9633825. As noted in that document, in our view, expenses paid by a subject corporation to another corporation or a partnership, for services rendered to it by the employees or partners of that other corporation or partnership, will constitute amounts incurred by the subject corporation for the services of other individuals, for the purposes of clause 206(1.1)(d)(iii)(C) of the Act.

In your request, you also referred to our document 9634235. It should be noted that our comments in that document were specific to a scenario in which the subject corporation was required to have a registered office under its constating documents such as its Articles of Incorporation. In our view, where a subject corporation maintains a registered office, as required by its constating documents, in the office of the corporation's Canadian lawyer, it will constitute an "office" of the subject corporation for the purposes of subsections 206(1.1)(d)(i) and (ii) of the Act.

We trust that the above comments are of assistance. It should be noted that the above comments do not constitute an income tax ruling and accordingly, as indicated in paragraph 22 of Information Circular 70-6R4, are not binding on the Canada Customs and Revenue Agency.

Yours truly,

Roberta Albert, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate