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.
PRINCIPLE ISSUES: Whether Article 13(5) of the Canada-Germany Tax Agreement as Amended (the "Treaty") applies to the hypothetical scenarios.
Position: Yes
Reasons: Wording of new paragraph of the Treaty. Final determination, terms and conditions are within the discretion of the Competent Authorities.
XXXXXXXXXX 2003-000285
August 29, 2003
Dear XXXXXXXXXX:
Re: Canada/Germany Income Tax Agreement (2001)
This is in reply to your letter regarding the above noted subject matter. You have asked us for comments regarding Article 13(5) of the Canada-Germany Tax Agreement as Amended (the "Treaty") in the context of the hypothetical scenarios set out below:
1. Transfer of property by a resident of Germany, to a German corporation or partnership where the transaction may be done without any tax consequences under German law; and
2. Transfer by a resident of Germany, of an interest in a Canadian partnership, the value of which is derived principally from real estate in Canada, and that would qualify as "taxable Canadian property" in subsection 248(1) of the Income Tax Act, to another German partnership where the transaction may be done without any tax consequences under German law.
Newly amended Article 13(5) of the Treaty states as follows:
"5. Where a resident of a Contracting State alienates property in the course of an organization, reorganization, amalgamation, division or similar transaction and profit, gain or income with respect to such alienation is not recognized for the purpose of taxation in that State, if requested to do so by the person who acquires the property, the competent authority of the other Contracting State may agree, subject to terms and conditions satisfactory to such competent authority, to defer the recognition of the profit, gain or income with respect to such property for the purpose of taxation in that other State."
The Treaty came into force March 28, 2002 in Canada and applies in respect of taxes other than taxes withheld at the source, to taxation years beginning on or after January 1, 2001. Accordingly, if one of the hypothetical transactions stated above occurred in a taxation year beginning after 2000, the amended provisions in the Treaty may apply. If so, in our view, the hypothetical transactions fall within Article 13(5) but application of the aforesaid provision to an actual fact situation lies with CCRA Competent Authority Section of the International Tax Directorate, who may choose to decline a particular request to enter into an agreement or attach terms and conditions as they deem necessary to an agreement that they enter into. Accordingly, we refer you to them for final determination should an actual situation arise.
The above comments represent our general view with respect to the subject matter and are not binding on the Canada Customs and Revenue Agency, as explained in Paragraph 22 of Information Circular 70-6R5.
We trust that the foregoing will be of assistance to you.
Yours truly
Olli Laurikainen
Section Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
Cc: Jim Gauvreau
Director
Competent Authority Services Division
International Tax Directorate
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.../cont'd
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