13 May 2002 External T.I. 2002-0135555 - French & Entitlement to Treaty Benefit

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: Is a French société en nom collectif ("SNC") that has made an irrevocable election to be taxed as a corporation in France considered a resident of France for the purposes of the Canada-France Income Tax Convention ?

Position:   			We are now reconsidering this issue.

Reasons: N/A

International Fiscal Association (Canadian Branch) International Tax Seminar, May 13, 2002, CCRA Roundtable - Response to Question 6

Question 6 - SNCs

The CCRA has confirmed in two technical interpretations that in its view a French société en nom collectif ("SNC") constitutes a partnership for Canadian tax purposes even in circumstances where it has made an election under French law to be taxed domestically in France as a corporation (see AC59718 and 9221815). The CCRA has recently also confirmed that an SNC that has made an irrevocable election to be taxed as a corporation in France would not be considered a resident of France for the purposes of the Canada-France Income Tax Convention "as it is not liable to tax in France by reason of its domicile, residence, place of management or any other criterion of a similar nature" (Technical Interpretation 2000-0048855, September 13, 2001). Can the CCRA comment on this position in the broader context of its views with respect to partnerships and limited liability companies that are subject to elective rules under the U.S. Internal Revenue Code.

CCRA's Response

We originally opined that where a French SNC makes an irrevocable election to be taxed as a corporation in France, it would not be considered a resident of France for purposes of the Canada-France Income Tax Convention as it is not liable to tax in France by reason of its domicile, residence, place of management or any other criterion of a similar nature. Pursuant to a technical interpretation request, we are now reconsidering this issue.

Our original opinion was based on limited information on the French corporate tax system. We have therefore requested additional information so that we can fully analyze the issue. We are also considering our position on an SNC that elects to be taxed as a corporation in France in light of our position that a U.S. limited liability company that elects to be treated as a corporation under the U.S. "check-the-box" regulations is a resident of the U.S. for purposes of the Canada-U.S. Income Tax Convention.

We realize that it is difficult to distinguish the case of an SNC that elects to be taxed as a corporation in France from the case of a U.S. LLC that elects to be treated as a corporation for U.S. tax purposes. While we have not reached a final decision on whether an SNC that elects to be taxed as a corporation in France is a resident of France for purposes of the Canada-France Income Tax Convention, subject to receiving confirmation of certain information, we hope we could come to a view that is consistent with our position on a U.S. LLC that elects to be treated as a corporation for U.S. tax purposes.

Presenter: Jim Wilson
Prepared by: Sabrina Wong
Phone number: 957-9231
Division: Income Tax Rulings Directorate