Income Tax Severed Letters - 2012-12-12


2012 Ruling 2011-0429261R3 - Article IV(7)(b) Loan Restructuring

CRA Tags
18(6), 20(1)(c), Treaties Article IV(7), Treaties Article XI

Principal Issues: 1) Whether treaty benefits apply to interest payments on intercompany debt owing by a Canadian-resident corporation that is fiscally transparent for United States tax purposes. 2) Whether principal amount of intercompany debt owed by Canadian-resident subsidiary to its Canadian-resident holding company is deemed to be owed to non-resident under s. 18(6). 3) Interest Deductibility.

Position: 1) Yes. 2) No. 3) Subject to reasonableness and thin capitalization restrictions, interest is deductible.

Reasons: 1) Interest will be considered to receive “same treatment” for the purposes of Article IV(7)(b). 2) Existing position. 3) Meets the requirements of s. 20(1)(c).

Ministerial Correspondence

13 September 2012 Ministerial Correspondence 2012-0458841M4 - Part XIV Tax & Part 1 Tax Rates

CRA Tags
s.219, Treaties Article X(6)

Principal Issues: 1. Whether the rate of Branch tax is reduced under the Canada-Ireland Treaty. 2. Whether Canada's corporate income tax rate is the same for a Canadian resident corporation as for a non-resident corporation.

Position: 1. Yes 2. Yes

Reasons: Article 10(6) of the Canada-Ireland Treaty restricts the rate of Part XIV tax that can be imposed and both resident and non-resident corporations carrying on business in Canada are subject to the same general corporate rates of Part 1 tax.

Technical Interpretation - External

20 November 2012 External T.I. 2012-0440031E5 F - Quebec Tax Credit for Production of Performances

CRA Tags
Québec Credit for the Production of Performances includible under ss. 12(1)(x)(iii) and (iv) rather than s. 9

Principal Issues: Whether paragraph 12(1)(x) would apply to the Quebec tax credit for the production of performances received by the taxpayer in the situation described?

Raisons: Facts, 12(1)(x), previous positions.

8 November 2012 External T.I. 2012-0464781E5 - Cost of Insurance

CRA Tags

Principal Issues: Taxpayer requesting clarification on the rules relating to the calculation of the cost of a life insurance policy and the tax treatment of life insurance policy loans.

Position: Provided general comments.

Reasons: 148(1); 148(7); 148(9)

11 October 2012 External T.I. 2011-0429021E5 - Administrative Position subsections 87(4)/116

CRA Tags
87(8), 248(1), 87(4), 87(8.1)

Summary under s. 116(1).

Principal Issues: The requester asks our views regarding whether the CRA's administrative position in paragraph 45 of IT-474R2 will continue to apply in light of the March 4, 2010 amendments to subsection 87(4) of the Act.

Position: It is our position that the CRA's administrative position in paragraph 45 of IT-474R2 will continue to apply in light of the amendments to subsection 87(4) of the Act.

Reasons: As outlined in previous rulings position #2011-0391741I7.

24 July 2012 External T.I. 2011-0431601E5 - Employer/Employee Relationship

CRA Tags
125(7), 153(1)

Principal Issues: Whether an employer is required to withhold from payments made to an individual who is an employee?

Position: Yes

Reasons: Wording of the Act.


8 May 2012 Roundtable, 2012-0444711C6 - 2012 CALU Roundtable - Question 12

CRA Tags
248(1) "cost amount", 163(2.4)(c), 162(7), 162(10), 148(9), 162(10.1), 162(5), 233.3, 233.5

Principal Issues: What is the expectation of the CRA for policyholders in determining the ACB of a foreign insurance policy?

Position: The CRA would expect that the determination of the “cost amount” of a “specified foreign property” is made on the basis of all the information that can reasonably be obtained in a given situation.

28 May 2012 CTF Roundtable Q. 5, 2012-0444911C6 - 2012 CTF Prairie Q5 - Circularity with 164(6)

CRA Tags
164(6), 40(3.6), 40(3.61)

Principal Issues: The CTF has asked how CRA would administer subsection 164(6) where a circularity issue arises in applying subsection 40(3.61).

Position: We recognize that the circularity issue exists on a technical reading of 40(3.6), 40(3.61) and 164(6). Will review on a case-by-case basis.

Reasons: To date, we have never had an actual case referred to our directorate.

Technical Interpretation - Internal

11 September 2012 Internal T.I. 2012-0454321I7 - NEX of the TSX Venture Exchange

CRA Tags
248(1) "recognized stock exchange", 248(1) "designated stock exchange", 262

Summary under s. 248(1) - recognized stock exchange.

Principal Issues: Is NEX considered a “recognized stock exchange” as defined under subsection 248(1) of the Income Tax Act?

Position: yes

Reasons: NEX is a stock exchange located in Canada as required by definition.