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.
Principal Issues: tax treatment of refund of provincial tax
Position: particular refund is included in 12(1)(x), but if 12(2.2) election on full amount no amount is included in 12(1)(x)
Reasons: 12(1)(x)(iv)(B) relates to all "outlays or expenses" and not merely tax deductible outlays or expenses
2004-008636
XXXXXXXXXX Denise Dalphy, LL.B.
(613) 941-1722
September 8, 2004
Dear XXXXXXXXXX:
We are writing in reply to your letter dated July 15, 2004 wherein you asked whether a refund of provincial income tax that is paid to a registered corporation pursuant to section 17 of the British Columbia's International Financial Activity Act, 2004 (which you advise will come into effect on September 1, 2004) must be included in the recipient's income pursuant to paragraph 12(1)(x) of the Income Tax Act (the "Act").
Written confirmation of the consequences inherent in particular transactions are given by this directorate only where the transactions are seriously proposed in the near future and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5. Notwithstanding the foregoing, we are providing the following general comments.
In general, it is our opinion that the provisions of paragraph 12(1)(x) of the Act would require a corporate taxpayer to include in income the provincial tax refund received pursuant to section 17 of the British Columbia's International Financial Activity Act, 2004. However, if the taxpayer makes the election provided for in subsection 12(2.2) of the Act in respect of the full amount of the tax refund received, the amount elected on would reduce the amount received such that no part of the refund would have to be included in income under paragraph 12(1)(x) of the Act.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
Yours truly,
Steve Tevlin
Manager
Corporate Financing Section
Financial Industries Division
Income Tax Rulings Directorate
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