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 shares of a foreign corporation are specified foreign property of a taxpayer if the taxpayer holds them indirectly through a corporation resident in Canada?
Position: No.
Reasons: The taxpayer does not have an interest in, or right with respect to those shares, as required by paragraph (f) of the definition of specified foreign property in subsection 233.3(1).
XXXXXXXXXX
2014-051702
Hugo Gravel, LL.B., D.
Fisc.
May 12, 2014
XXXXXXXXXX:
Subect: Section 233.3 ITA
This is in response to your e-mail dated December 30, 2013 wherein you inquired whether section 233.3 of the Income Tax Act, 1985 R.S.C., c. 1 (5th suppl.), as amended (the "ITA") was applicable to the particular situation described below.
Facts
Our understanding of the relevant facts is as follows:
- 1. An individual ("Mr. X"), resident in Canada, owns all of the issued and outstanding shares of a corporation ("Canco") resident in Canada for the purposes of the ITA;
- 2. Canco owns all of the issued and outstanding shares of a corporation ("Forco") that is not resident of Canada for the purposes of the ITA;
- 3. Mr. X's cost amount with respect to the shares he holds in Canco is in excess of $100,000;
- 4. Canco's cost amount with respect the shares it holds in Forco is in excess of $100,000;
Issue
The only issue raised in your request is whether the shares held in Forco, by Canco, constitute specified foreign property for Mr. X pursuant to paragraph (f) of the definition of this expression in subsection 233.3(1) ITA, such that it could trigger, for him, the reporting obligation of subsection 233.3(3) ITA?
Our comments
This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.
We are of the view that, in the situation you described, the shares of Forco would not be specified foreign properties of Mr. X, as Mr. X does not have an interest in, or a right in Forco. In the context of section 233.3, it is our opinion that this expression does not apply to indirect shareholding. In order for Mr. X to have an interest, or right in Forco, Mr. X should directly own shares of it. However, the shares of Forco would be specified properties of Canco pursuant to paragraph (c) of the definition of specified property of subsection 233.3(1) ITA.
We trust these comments are of assistance.
Guy Goulet, CPA, CA, M. Fisc.
Manager
for Director
International & Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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