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 the CRA can confirm its policy with respect to the application of Part XIII tax to "standard convertible debentures".
Position: No.
Reasons: The CRA cannot provide certainty regarding the very broad range of situations in which convertible debentures can be issued. The Income Tax Rulings Directorate encourages issuers and/or holders of convertible debts to request advance income tax rulings if they have concerns about the application of Part XIII of the Act to convertible debts in the context of proposed transactions.
XXXXXXXXXX
2013-051563
Andrea Boyle, CGA
March 18, 2014
Dear XXXXXXXXXX:
Re: Standard convertible debentures
We are writing in reply to your correspondence dated December 16, 2013 asking us to confirm whether the policies of the Canada Revenue Agency (the CRA) with respect to the application of Part XIII tax to "traditional convertible debentures" now apply to "standard convertible debentures".
Our Comments
We are unable to make the requested confirmation. In general, the CRA cannot provide certainty concerning the application of Part XIII tax to the very broad range of situations in which convertible debentures can be issued. They can be issued by both public and private corporations, by trusts and by partnerships. Their terms and conditions can be complex due to the wide variety of products available in the marketplace, and the particular circumstances and the terms and conditions of the debentures may differ from one situation to another.
As a result, it is not possible for the CRA to anticipate the result of the application of subsection 214(7) and the definition of "participating debt interest" in subsection 212(3) of the Act with respect to all possible situations involving convertible debts.
The Income Tax Rulings Directorate continues to encourage issuers and/or holders of convertible debts to request advance income tax rulings if they have concerns about the application of Part XIII of the Act to convertible debts in the context of proposed transactions.
We trust that our comments will be of assistance.
Yours truly,
G. Moore
for Director
Partnerships and Corporate Financing Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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