2011 Ruling 2009-0346131R3 - XXXXXXXXXX Fonds Commun de Placement

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: Whether it is reasonable to consider a XXXXXXXXXX Fonds Commun de Placement to be a co-ownership arrangement.

Position: Yes

Reasons: Its attributes more closely resemble a co-ownership than any known entity under Canadian tax law.

XXXXXXXXXX
									2009-034613
Attention:  XXXXXXXXXX 

XXXXXXXXXX , 2011

Dear Sir:

Re: XXXXXXXXXX (the “Manager”)
XXXXXXXXXX (the “Sub-Custodian”)
XXXXXXXXXX (the “Forco”)
Advance Income Tax Ruling ___________________

We are writing in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-referenced taxpayers. We acknowledge additional information provided during our telephone conversations (XXXXXXXXXX ) and in your emails.

To the best of your knowledge and that of the taxpayers involved, none of the issues involved with this request:

(i) is involved in an earlier return of the taxpayers or a related person;

(ii) is being considered by a tax services office or a taxation centre in connection with a tax return already filed by the taxpayer or a related person;

(iii) is under objection; or

(iv) is before the courts or, if a judgement has been issued, the time limit for appeal has not expired.

The rulings given herein are based solely on the facts, proposed transactions and purposes of the proposed transactions described below. Facts and proposed transactions in the documents submitted with your request not described below do not form part of the facts and proposed transactions on which this ruling is based and any reference to these documents is provided solely for the convenience of the reader.

Unless otherwise stated, all references to a statute are references to the provisions of the Income Tax Act, R.S.C. 1985 c.1 (5th Supp.) as amended to the date hereof (the “Act”), and every reference herein to a Part, section, subsection, paragraph or subparagraph is a reference to the relevant provisions of the Act.

Definitions

In this letter the following terms have the meanings specified:

(a) “Administrator” means XXXXXXXXXX , a corporation formed under XXXXXXXXXX law with its head office located at XXXXXXXXXX . The Administrator acts on behalf of the employees entitled to insurance or other pension benefits who are named in the CTA as “third party beneficiaries” within the meaning of section XXXXX of the XXXXXXXXXX Civil Code;

(b) “affiliated person” has the meaning assigned by subsection 251.1(1);

(c) “Class” in a particular Sub-Fund means a class of Units in that Sub-Fund;

(d) “Company” means XXXXXXXXXX , a corporation incorporated and resident in XXXXXXXXXX ;

(e) “Company Group” means the Company and its direct and indirect subsidiaries;

(f) “CRA” means Canada Revenue Agency;

(g) “CTA” means the contractual trust agreement through which the entities in the Company Group will invest in the Fund. XXXXXXXXXX ;

(h) XXXXXXXXXX ;

(i) “Custodian” means XXXXXXXXXX , which acts as custodian on appointment by the Manager with respect to the assets comprising the Fund;

(j) “Custody Agreement” means the Re-Stated Custodian and Paying Agent Agreement which is an agreement to be entered into between the Manager and Custodian with respect to the appointment and duties of the Custodian in relation to the Fund;

(k) “FCP” means Fonds commun de placement;

(l) “Forco” means XXXXXXXXXX ;

(m) “Fund”or “The Fund” means XXXXXXXXXX undertaking for collective investment, constituted as an FCP and established by the Manager under the terms of the Management Regulations pursuant to the XXXXXXXXXX and more recently under the XXXXXXXXXX . The Fund is an FCP in the form of an umbrella fund in accordance with Part XXXX of the XXXXXXXXXX and in compliance with the provisions of XXXXXXXXXX as well as the provisions of the XXXXXXXXXX , relating to certain definitions of the XXXXXXXXXX ;

(n) “GTC” means the General Tax Code of XXXXXXXXXX ;

(o) XXXXXXXXXX ;

(p) XXXXXXXXXX ;

(q) XXXXXXXXXX ;

(r) “Manager” means XXXXXXXXXX , a corporation incorporated on XXXXXXXXXX and organized as a public limited company (société anonyme) under Chapter XXXXXXXXXX of the XXXXXXXXXX . The Manager has its head office and its registered office in XXXXXXXXXX ;

(s) “Management Regulations” means the contractual agreement drafted in accordance with Chapter XXXXXXXXXX of the XXXXXXXXXX , between the Manager, the Custodian and the Unitholders;

(t) “Proposed Transactions” means the transactions described in paragraphs 23 to 49 hereof under the heading “Proposed Transactions”. Some of these transactions have been completed on or prior to the date of this letter;

(u) “Prospectus” means XXXXXXXXXX prepared in accordance with the XXXXXXXXXX and pursuant to which Units of the Sub-Fund will be issued;

(v) “Sub-Custodian” means XXXXXXXXXX ;

(w) “Sub-Fund” means a distinct portfolio of assets invested in accordance with the particular objectives and policies determined by the Manager and disclosed in the Prospectus and liabilities attributable to the portfolio of assets;

(x) “Tax Agreement” means the Agreement between Canada and XXXXXXXXXX for the Avoidance of Double Taxation with respect to Taxes on Income and Certain Other Taxes, the Prevention of Fiscal Evasion and the Assistance in Tax Matters;

(y) “Tax Treaty” has the meaning assigned under subsection 248(1);

(z) “Transferable Securities” means securities permitted to be invested by a FCP under the XXXXXXXXXX ;

(aa) “Trust” means an arrangement created as a consequence of the CTA;

(bb) “Trustee” means XXXXXXXXXX , an incorporated society formed under XXXXXXXXXX law and managed and controlled out of XXXXXXXXXX ;

(cc) “UCIs” means, pursuant to the XXXXXXXXXX , undertakings for collective investment, including an undertaking for collective investment in transferable securities (“UCITS”);

(dd) “UCITS” means undertaking for collective investment in transferable securities governed by XXXXXXXXXX on the coordination of laws, regulations and administrative provisions relating to UCITS. Pursuant to Article XXXXXXXXXX of the XXXXXXXXXX , such undertakings may be constituted under the law of contract as FCPs managed by a manager or under statute as an investment company;

(ee) “Unit” in a particular Sub-Fund means a right of ownership evidenced by the inscription of the Unitholder’s name in the register of Units, representing the holder’s proportionate (i) co-ownership interest in the assets comprising the Sub-Fund and gross income from such assets and (ii) share of the liabilities attributable to such assets; and

(ff) “Unitholder” of a particular Sub-Fund means initially an entity of the Company Group which holds a Unit in the Sub-Fund.

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

Facts

1. FCPs are governed under the XXXXXXXXXX . Pursuant to Article XXXXXXXXXX of the XXXXXXXXXX and for the purpose of the application of XXXXXXXXXX law on UCIs under Part XXXXXXXXXX of the XXXXXXXXXX , a FCP is a collection of transferable securities and other liquid assets enumerated in Article XXXXXXXXXX of the XXXXXXXXXX , made up and managed according to the principle of risk-spreading on behalf of joint owners whose rights are represented by units. FCPs do not have a separate legal personality under the laws of XXXXXXXXXX , but are unincorporated contractual arrangements for the co-ownership of transferable securities under UCITS and other financial assets permitted by the XXXXXXXXXX .

2. Pursuant to Part XXXXXXXXXX of the XXXXXXXXXX , the XXXXXXXXXX must authorize the management of UCITS by a management company. Furthermore, the XXXXXXXXXX may, in the circumstances enumerated in Part XXXXXXXXXX of the XXXXXXXXXX , revoke the authorization of a management company to manage a UCITS.

Flow-Through Treatment of FCPs

3. Article XXXXXXXXXX of the XXXXXXXXXX Income Tax Act enumerates the categories of entities which are considered resident taxpayers. A FCP does not fall within these categories. From a XXXXXXXXXX income tax perspective a FCP is a transparent vehicle whereby it itself is not subject to tax, but rather its unitholders are subject to tax. The XXXXXXXXXX Tax Authority does not treat a FCP as a resident of XXXXXXXXXX for the purposes of any income tax treaty.

4. As a FCP is viewed as transparent from a XXXXXXXXXX tax perspective, investors who are resident in XXXXXXXXXX are, technically, treated for XXXXXXXXXX income tax purposes as having earned their share of the income and gains that arise or accrue in respect of a FCP and are subject to XXXXXXXXXX tax thereon. From a purely administrative perspective, however, XXXXXXXXXX residents are generally only required to report income and gains at the time of a distribution from the FCP or a disposition of the units.

5. Distributions, interest or gains derived from the sale of securities held by a FCP may be subject to taxes, including withholding tax in the countries where the FCP’s assets are invested.

6. The tax treatment of income at an investor level is dependent on the individual tax regulations applicable to the investor.

Contractual Trust Agreement (CTA)

7. The Company and its affiliates provide pension benefits to their active and retired employees (and surviving dependents). In order to protect the pension claims of these beneficiaries against insolvency of a particular granting institution, the Company, on its own behalf and on behalf of its affiliated companies who participate in the arrangement (“corporate investors”), has entered into a contractual trust agreement (CTA) with the Trustee and the Administrator. The arrangement so created as a consequence of the CTA is herewith referred to as the Trust.

8. Under the Trust, the Administrator acts on behalf of the employee group entitled to insurance or other pension benefits and named in the CTA as 3rd party beneficiaries within the meaning of section XXXXXXXXXX paragraph XXXXXXXXXX of the XXXXXXXXXX .

9. The Trust has been in effect since XXXXXXXXXX and has been used to administer and invest for the benefit of occupational pension plans. The Trustee holds the invested property in a fiduciary capacity for the corporate investors and the employees of these corporate investors. The Trust is not a legal entity, but only an arrangement between the parties. Under the Trust, corporate investors participating in the CTA have contributed assets to the Trust to secure their pension obligations to active and retired employees. The terms of the CTA create a fiduciary obligation for the Trustee to ensure that the assets transferred to the Trust by the corporate investors can be used only to satisfy the pension obligations of the corporate investors.

10. Under the terms of the CTA, the corporate investors have separated the pension plan assets from their other corporate assets and then transferred the pension plan assets to the Trustee which has invested and will continue to invest the assets with the purpose of using the assets and the income therefrom to assist the corporate investors in satisfying their pension obligations to their employees. The trust relationship between the Trustee and the corporate investors was created in section XXXXXXXXXX of the CTA. The CTA also established a conditional trust relationship between the Trustee and the employees of the corporate investors. In particular, under section XXXXXXXXXX of the CTA the Trustee is to act as beneficiary trustee for the employees such that in the case of insolvency of the corporate investor, the employees would be directly entitled to require payouts from the Trustee in accordance with section XXXXXXXXXX of the XXXXXXXXXX .

11. The corporate investors cannot repatriate the assets from the Trust or seize the assets from the Trust or otherwise obtain said assets unless the Trust is wound up and the assets disbursed in accordance with XXXXXXXXXX law and the terms of the CTA.

12. In the event of a bankruptcy or insolvency of the corporate investors, the creditors and other parties are unable to seize the contributed assets. The employees or former employees of the corporate investors will have a crystallized claim against the income and assets held in the Trust to satisfy the rights of the employees or former employees under the corporate investors’ pension plans. Under such circumstances, the administrator acting on behalf of the employees or former employees will ensure that the Trustee makes appropriate payments to the employees or former employees.

13. As long as the corporate investors remain extant, the beneficial and economic owners of the assets are the corporate investors.

14. An investment committee (appointed by the corporate investors) will adopt investment guidelines for the Trustee in accordance with XXXXXXXXXX law. The investment strategy will be defined in writing and communicated to the Trustee. The Trustee is not responsible for making any investments and cannot and will not act in any investment advisory capacity. The corporate investors via the investment committee will be solely responsible for the investment strategy and for the investment of the assets in the Trust.

15. Income from the investment assets earned by the Trust will be accumulated and reinvested for the purpose of satisfying the pension obligations of the corporate investors. A corporate investor is not legally entitled to any income earned on the assets by the Trust unless paid out by the Trustee to the corporate investor in accordance with the terms of the CTA and XXXXXXXXXX law.

16. For XXXXXXXXXX accounting purposes, a corporate investor treats the assets contributed to the Trust as though the assets were held directly by it and is reflected on its financial statements as offsetting its pension obligations.

17. While a corporate investor remains extant (not bankrupt or insolvent), the corporate investor will make pension payments to its employees and former employees directly out of its corporate operating funds. The corporate investor will then apply to the Trustee for reimbursement from the Trust for the funds paid out to its employees and former employees. To obtain such reimbursement, the corporate investor must prove to the Trustee that it has in fact disbursed funds to its employees or former employees in satisfaction of its pension obligations. If the Trustee is so satisfied, then the Trustee must reimburse the corporate investor.

Tax treatment of the Income of the Trust in XXXXXXXXXX

18. The XXXXXXXXXX income tax treatment of the income of the Trust is provided for under section XXXXXXXXXX of the GTC which provides that:
“XXXXXXXXXX .”

19. The legal owner of the investment property in the Trust is the Trustee. The beneficial owners of the investment property are the beneficiaries under the Trust (i.e., the corporate investors). Income from the assets held by the Trustee under the Trust would normally have been subject to tax in XXXXXXXXXX under section XXXXXXXXXX of the XXXXXXXXXX as the Trustee would qualify as an "other legal person under civil law". However, as described above, section XXXXXXXXXX paragraph XXXXXXXXXX of the GTC provides that taxation of the income from the assets of the Trust takes place at the level of the beneficial owners, and not at the level of the legal owner. This is achieved by the attribution of assets to the beneficial owners rather than to the legal owner under section XXXXXXXXXX of the GTC. The fact that the goods (i.e., the investment assets) are attributable to the beneficial owner automatically means that the income from those assets is also attributed to the beneficial owner. So while it is not specifically stated that the Trust is exempt from XXXXXXXXXX tax, section XXXXXXXXXX of the GTC, within the overall scheme of the XXXXXXXXXX taxation system, is the means by which the beneficial owners are taxed on the income from the assets of the Trust. Absent such provision, the legal owner (i.e. the Trustee) would be taxed on such income under the XXXXXXXXXX .

20. Hence, under XXXXXXXXXX tax law, the corporate investors are taxed on the income earned by the Trust and are able to deduct the payments made to their employees or former employees under their pension arrangements. The XXXXXXXXXX legal entities of the Company Group referred to in the Appendix will remain the economic or beneficial owners of the trust assets. In case withholding tax is assessed (i.e., on dividends from investments out of the trust assets), the withholding tax will be directly allocated through the Trust to the corporate investors, who will declare the income and claim a credit for the withholding tax in their annual tax declaration.

21. The terms of the CTA provides no tax deferral for its XXXXXXXXXX investors in that any net income of the Trust that is not distributed by the Trust to its investors is deemed to be distributed for XXXXXXXXXX income tax purposes.

22. Forco is a corporation resident in XXXXXXXXXX for the purposes of the Act and the Tax Agreement. The Trust holds all of the issued and outstanding shares of Forco.

Proposed Transactions

23. The Fund will be constituted by the Manager pursuant to the Prospectus and the Management Regulations to serve as an investment vehicle for pension funds of the Company Group. The Fund will meet the definition of “FCP” under the XXXXXXXXXX . Pursuant to the XXXXXXXXXX , the Fund is an “umbrella fund” that enables investors to choose between one or more investment objectives by investing in one or more portfolio of assets. The Fund will consist of multiple distinct portfolios of assets and liabilities, each constituting a Sub-Fund. The board of directors of the Manager may decide at any time to create new Sub-Funds. Each Sub-Fund is treated as a separate pool of assets and operates independently such that each portfolio of assets in the Sub-Fund is being invested for the exclusive benefit of a particular Sub-Fund and to which all liabilities, income and expenditures attributable or allocated to such Sub-Fund shall be applied and charged. The net proceeds from the subscription to each Sub-Fund will be invested in the specific portfolio of assets constituting that Sub-Fund.

24. Unitholders of each Sub-Fund will invest in a particular portfolio of assets by acquiring Units of a particular Sub-Fund issued by the Manager in accordance with the Management Regulations.

25. In accordance with the Management Regulations, the board of directors of the Manager may decide to issue, within each Sub-Fund, different classes of Units (“Classes”) having (i) a specific sales and redemption charge structure and/or (ii) a specific management or advisory fee structure and/or (iii) different distribution structure, different unitholders, different servicing fees, or other fees and/or (iv) different types of targeted investors and/or (v) such other features as may be determined by the board of directors of the Manager from time to time.

26. Classes of Units may also (without limitation) be set-up with “enhanced features”, which provide that the part of the Sub-Fund’s return that is allocated to a Class be enhanced by the use of techniques and instruments such as securities lending or the use of derivatives, all within the scope permitted under the XXXXXXXXXX and the Management Regulations.

Rights of Unitholders

27. The Management Regulations will provide that each Unit of a Sub-Fund represents the proportion of each Unitholder’s rights and obligations as beneficial co-owner of the assets comprising the Sub-Fund and obligations in respect of liabilities attributable to such assets. The Management Regulations further provide that each Unit is indivisible with respect to the rights conferred to it.

28. Pursuant to Article XXXXXXXXXX of the XXXXXXXXXX , the liabilities of a Unitholder will be limited to the Unitholder’s participation in a particular Sub-Fund.

29. The Management Regulations will provide that gross income includes income, interest, dividends, profits and similar amounts derived or generated from the assets comprising a particular Sub-Fund as such income arises.

30. The Management Regulations will provide that the gross income from the assets comprising a particular Sub-Fund is beneficially owned by the Unitholders of the Sub-Fund and as such the Manager will generally pay each Unitholder a sum equal to the Unitholder’s gross income entitlement less any applicable fees, costs, taxes, charges and expenses to the extent such amounts are available.

31. Units may not be transferred. Any dealing transactions (e.g. subscriptions, redemptions, conversions) of the Units need to be directed to, and processed through, the registrar and transfer agent of the Fund. Further, no voting rights will be attached to the Units.

32. Unitholders can redeem their Units of a Sub-Fund in the manner set out in the Management Regulations, for an amount based on the net asset value per Unit of a particular Class in a particular Sub-Fund.

Management of the Fund

33. The Manager will have the overall responsibility for management of the assets comprising the Fund in accordance with the Prospectus, Management Regulations, XXXXXXXXXX and any other relevant regulatory requirements.

34. Pursuant to Article XXXXXXXXXX of the XXXXXXXXXX , the Manager is required to manage the Fund in accordance with the Management Regulations and for the exclusive interest of the Unitholders.

35. The Manager and the Custodian will deal with each other at arm’s length for the purposes of the Act. Both the Manager and the Custodian are non-residents of Canada for the purposes of the Act and do not engage in any activities in Canada.

36. Under the XXXXXXXXXX , the Manager can delegate its functions to third parties for the purpose of a more efficient conduct of its business. Similarly, the Custody Agreement will provide that the Custodian is also entitled to delegate its functions to third parties.

37. Where the investment policies of the Sub-Funds permits, in order to reduce operational and administrative charges, assets of any Sub-Fund may, in full or in part, be co-managed with assets of one or more other Sub-Funds or another UCI provided it is managed by the same entity (“Pool Manager”) and has the same custodian and central administration agent. Under the relevant co-management arrangement, the Pool Manager shall be entitled to take, on a consolidated basis for the relevant co-managed Sub-Funds, investment, reinvestment and disinvestment decisions which influence the portfolio of each co-managed Sub-Fund.

38. Cash or other assets (the “co-managed assets”) from each of the participating Sub-Funds, which will be subject to various co-management techniques shall be identified. Each participating Sub-Fund will remain entitled to its assets under co-management, which will represent a portion of the value of the co-managed assets. The co-managed assets will be rebalanced between participating Sub-Funds on a daily basis: the value for each Sub-Fund will be its previous position increased or decreased by the amount of capital that has moved in or out. By this means, it is possible at all times to keep track to a specific Sub-Fund its entitlement to the co-managed assets. Dividends, interest and other distributions of an income nature received on the co-managed assets will be credited to the participating Sub-Funds in proportion to their respective holding and participation in the co-managed assets at the time of receipt. The rebalancing includes the attribution on a daily basis of income earned or accrued against the inflows or outflows of capital, thereby allowing an accurate reporting of income attribution between participating Sub-Funds.

39. Redemption and subscription of the Units in each of the Sub-Funds participating in the co-management arrangement will be processed through a specific account kept outside of the co-managed assets and through which subscriptions and redemptions must pass.

40. Assets of a particular Sub-Fund that are subject to co-management shall only be those assets that are intended to be invested in a manner fully compatible with the investment policy of that particular Sub-Fund. The Custodian shall at any time keep the assets and liabilities of the Sub-Fund and Class segregated from each other including, as the case may be, a proportionate entitlement to a given asset, and shall therefore be able at all times to identify the assets of each Sub-Fund and Class.

41. The Manager or the relevant Sub-Fund or the Pool Manager (as applicable) may at any time decide to discontinue the use of the co-management technique for any Sub-Fund or Class, and/or to dissolve a pool of co-managed assets. In such cases, the pool's assets will be allocated (in full or in part) to the relevant Sub-Funds or Classes, in proportion to its/their participation in the pool.

42. The Manager may decide to pay out interim distributions for each Sub-Fund in accordance with the applicable laws.

Custodian

43. The Manager will appoint the Custodian which will also act as Accounting Agent. The Custodian shall, in accordance with the XXXXXXXXXX , carry out the duties of a custodian of a XXXXXXXXXX UCI. In particular, the Custodian shall be entrusted with the custody of the assets comprising the Fund, shall carry out all operations concerning the day-to-day administration of the assets comprising the Fund, shall perform its duties pursuant to the Management Regulations and shall execute transactions at the direction of the Manager pursuant to the Custody Agreement.

44. The Custodian may, for safe and efficient handling of the assets of the Sub-Funds, from time to time appoint a sub-custodian as an agent of the Custodian in each jurisdiction to execute and perform such powers and obligations of the Custodian under the Custody Agreement as the Custodian may from time to time determine.

45. The delegation by the Custodian of certain of its duties to sub-custodians shall not affect, reduce or increase the Custodian’s duty of supervision in accordance with the XXXXXXXXXX .

46. The Custodian will appoint a Canadian resident (“the Sub-Custodian”) as one of the sub-custodians. The Sub-Custodian will withhold and remit amounts on behalf of the Unitholders in respect of their Part XIII tax liabilities under the Act. Specifically, the Custodian and the Sub-Custodian will determine the amount of Part XIII tax to withhold on amounts paid or credited by a payer resident in Canada on a particular day in the following manner:

a) Based on the treaty residency of the Unitholders, the Custodian and the Sub-Custodian will first determine, for each Sub-Fund, the percentage of Units held by its Unitholder that are residents in each country other than Canada. The Custodian and the Sub-Custodian will then apply those respective percentages to the aggregate amount of the Sub-Fund’s Canadian source receipts that are taxable under Part XIII to determine the amount received by the resident Unitholders of each country. The Custodian and the Sub-Custodian intend to apply the relevant provisions of the applicable Tax Treaty to determine the amount of tax to withhold in respect of the amounts of each category of income received by the Unitholders resident in the relevant country for the purposes of the relevant Tax Treaty.

b) At the end of each month, the Sub-Custodian will compute the total amount withheld on behalf of the Unitholders for that month as determined above and remit that amount to the CRA by the 15th day of the following month. Within three months after the end of each year, the Sub-Custodian will produce the NR4 Supplementary forms reporting the total amount of Part XIII tax withheld and remitted to the CRA on behalf of the Unitholder and will forward to the CRA a copy of the NRA Supplementary forms issued by the Fund to the Unitholders as well as an NR4 Summary for the year.

c) A similar process to that described in subparagraphs a) and b) above will be followed with respect to any Part XIII.2 tax that may be applicable.

d) The Custodian and the Sub-Custodian will also determine, for each Sub-Fund, the percentage of its Unitholders that are resident in Canada. The Custodian and the Sub-Custodian will then apply that percentage to the aggregate amount of the Sub-Fund’s Canadian source receipts to determine the amount received by each Canadian resident Unitholder (“T5 Amount”). Within two months after the end of each year, the Sub-Custodian will provide the Unitholders with a T5 Supplementary form reporting the T5 Amount to each Canadian resident Unitholder and will forward to the CRA a copy of the T5 Supplementary issued by the Fund to the Unitholders as well as a T5 Summary for the year.

However, it is not anticipated that there will be any Canadian resident Unitholders in the near future.

Additional Information

47. As part of the first phase, the Company will use this asset pooling structure exclusively for the benefit of companies belonging to the Company Group. In particular, assets contributed to the Trust as part of the CTA arrangement by the entities in the Company Group in XXXXXXXXXX will be pooled into the Fund in exchange for Units in Sub-Funds. The Trust will then transfer such Units to Forco as a contribution to Forco’s capital.

48. XXXXXXXXXX , entities of the Company Group that are resident in XXXXXXXXXX may invest into the Fund directly or via a local pension plan.

49. Finally, XXXXXXXXXX , the Fund may offer participation to other arm’s length unrelated multi-national corporations.

Purpose of the Proposed Transactions

50. The Company intends to establish the Fund as a tax transparent cross-border pension asset pooling structure to XXXXXXXXXX pool the assets of XXXXXXXXXX pension schemes into a XXXXXXXXXX investment fund. The pooled assets would be held collectively and future investments would be made through the Fund to create better returns XXXXXXXXXX .

51. XXXXXXXXXX .

52. The pooling of the pension plan assets will provide the opportunity to lower overall risks, leverage the strength of the Company group, and enable a number of cost savings to be achieved through economies of scale. These savings would include a reduction in management fees, administration costs, and custodian fees. XXXXXXXXXX

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our rulings are as follows:

A. Provided that the Fund is a co-ownership arrangement under the law of Canada:

(i) for the purposes of the Act, each Unitholder of a particular Sub-Fund will be treated as owning a direct proportionate ownership interest in each property comprising the Sub-Fund;

(ii) for the purposes of Part I of the Act, each Unitholder of a particular Sub-Fund will be treated as directly earning or realizing, as the case may be, its proportionate share of income, losses, capital gains and capital losses from the property comprising the particular Sub-Fund whether or not distributed;

(iii) for the purposes of Part I of the Act, the character, source and timing of income, losses, capital gains, and capital losses earned by each Unitholder from the assets comprising the Sub-Fund in which such Unitholder has invested will not be affected by the fact that the Sub-Fund has been used as a mechanism by which each Unitholder owns its proportionate share of those assets;

(iv) a distribution from a Sub-Fund to the Unitholder will not be a taxable event for purposes of Part I of the Act;

(v) provided that a Unitholder of a particular Sub-Fund who is not resident in Canada is not considered to be carrying on business in Canada with respect to its ownership of the Units of the particular Sub-Fund, for the purposes of Part XIII and Part XIII.2 of the Act, any amount paid or credited by a payer resident in Canada to the Custodian or the Sub-Custodian in respect of assets of a particular Sub-Fund will be treated as being an amount paid or credited to the Unitholder of the Sub-Fund in proportion to the Unitholder’s ownership of the property of the particular Sub-Fund;

(vi) provided that a Unitholder of a particular Sub-Fund who is not resident in Canada is not considered to be carrying on business in Canada with respect to its ownership of the Units of the particular Sub-Fund, for the purposes of applying Part XIII and Part XIII.2 of the Act, the character, source and timing of any amount paid or credited by a payer resident in Canada in respect of the assets of the particular Sub-Fund will not be affected by the fact that the Sub-Fund has been used as a mechanism by which the Unitholder owns its proportionate share of those assets;

(vii) if a Unitholder’s Units of a particular Sub-Fund are redeemed, the Unitholder will, for the purposes of the Act, have disposed of a proportionate interest in the property of the particular Sub-Fund for the purposes of calculating any income or loss, or any capital gain or capital loss on such disposition;

(viii) provided that a Unitholder of a particular Sub-Fund who is not resident in Canada is not considered to be carrying on business in Canada with respect to its ownership of the Units of the particular Sub-Fund, for the purposes of applying Parts XIII and XIII.2 of the Act, the Unitholder that is resident for purposes of any applicable Tax Treaty in a particular jurisdiction shall be entitled to the benefits of that Tax Treaty in respect of the Unitholder’s proportionate interest in the income of the particular Sub-Fund, as applicable, to the extent such income qualifies for relief under the provisions of that Tax Treaty;

(ix) provided that a Unitholder of a particular Sub-Fund who is not resident in Canada is not considered to be carrying on business in Canada with respect to its ownership of the Units of the particular Sub-Fund and subject to any limitation on benefits provisions in the applicable Tax Treaty, if the Sub-Custodian, who has a physical presence in Canada and acts as the Canadian withholding agent, calculates and remits Part XIII or XIII.2 tax on behalf of a Unitholder, the amounts paid by the Sub-Custodian in respect of the Unitholder’s Part XIII or XIII.2 tax will be treated as being paid on behalf of the Unitholder in respect of its Part XIII or XIII.2 tax liability and both the Unitholder and the Custodian through its Sub-Custodian will be considered to have complied with Parts XIII and XIII.2 of the Act in respect of the income earned through the particular Sub-Fund of the Unitholder; and

(x) neither the Fund nor a Sub-Fund will be considered to be a trust for purposes of the Act.

The above rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and are binding on the CRA provided that the proposed transactions are completed by XXXXXXXXXX.

These rulings are based on the Act in the present form and do not take into account amendments to the Act which, if enacted into law, could have an effect on the rulings provided herein.

Other Comments

Nothing in this ruling should be construed as implying that the CRA has agreed to or reviewed any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above. In particular, nothing in this ruling should be construed as implying that the CRA has agreed to or ruled on:

(i) whether the Fund is a co-ownership arrangement;

(ii) whether a Unitholder is a resident of a country with which Canada has entered into a Tax Treaty;

(iii) whether income referred to herein is taxable under Part I, Part XIII or Part XIII.2, or the manner in which any article of a Tax Treaty applies to any Unitholder; and

(iv) whether any Unitholder would be considered to be carrying on business in Canada because of the provision of services to them by the Custodian or the Sub-Custodian in reference to their investments in Canadian securities.

Yours truly,

XXXXXXXXXX .
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

Appendix

INVESTORS WHO WILL ENTER THE STRUCTURE THROUGH THE COMPANY CTA

XXXXXXXXXX

INVESTORS WHO WILL LIKELY ENTER THE STRUCTURE THROUGH THE FCP

XXXXXXXXXX
XXXXXXXXXX