Income Tax Severed Letters - 2015-04-08


2014 Ruling 2014-0561281R3 F - Supplementary ruling

CRA Tags
245(2), 149.1(2)(a)

Principales Questions: Amendment to a proposed transaction brought to our attention.

Position Adoptée: Confirmation that, subject to the amendments and to the conditions, limitations, qualifications, and comments set out therein, the original Ruling no 2014-052929 will continue to be binding on the CRA.

Raisons: Minor amendment. In compliance with the law.

2014 Ruling 2014-0523691R3 - Non-Viable Contingent Capital

CRA Tags
212(3), 212(1)(b), 20(1)(c)
non-viable contingent capital sub debt of bank respected as non-participating interest debt
non-viable contingent capital sub debt of bank respected as non-participating interest debt

Principal Issues: 1) Is the interest deductible on the notes under paragraph 20(1)(c) of the Act? 2) Whether any interest paid or credited by ACo to non-residents, will be subject to withholding taxes under paragraph 212(1)(b) of the Act?

Position: 1) Yes. 2) No

Reasons: The requirements of paragraph 20(1)(c) are met. Deductibility under paragraph 20(1)(c ) is dependent upon there being a borrower and lender relationship between the parties to the Notes and such a loan exists until such time as a mandatory conversion event occurs. The mandatory conversion event is remote. 2) Payments on the Notes by ACo to non-residents, would not be subject to withholding taxes under paragraph 212(1)(b) of the Act. Aco deals at arm's length with any potential non-resident note holders and the interest paid on the Notes does not meet the definition of "participating debt interest" as defined in subsection 212(3) of the Act.

Technical Interpretation - External

20 March 2015 External T.I. 2014-0534301E5 - Canadian Withholding Tax on Retiring Allowance

CRA Tags
212(1)(j.1), Treaties Article 15, 115(1)(v), 115(2)(e)
retiring allowance paid to non-resident for loss of non-resident employment
retiring allowance paid to non-resident for loss of non-resident employment
retiring allowance paid to French individual for loss of non-resident employment
retiring allowance paid to French individual for loss of non-resident employment

Principal Issues: Whether a lump sum payment in respect of a loss of employment, made by a resident of Canada to a non-resident of Canada who had been seconded to the payer's non-resident subsidiary, is subject to Canadian tax pursuant to Part I and Part XIII?

Position: Part I - No; Part XIII - Yes.

Reasons: Part I - A retiring allowance, as defined in subsection 248(1), would not be considered remuneration described in subparagraph 115(2)(e)(i) of the Act; Part XIII - 212(1)(j.1) would apply, however, the Convention with France would give relief.

16 March 2015 External T.I. 2014-0524371E5 F - Assessment beyond normal reassessment period

CRA Tags
8(1)(n), 8(2), 152(4.2)
s. 152(4.2) not applicable if amount was not erroneous at time of return filing
no reversal of taxable benefits if repaid in subsequent year

Principal Issues: Whether a return of a taxpayer may be reassessed under subsection 152(4.2) to exclude from income the value of a benefit received in respect of employment in a case where the taxpayer is required to repay the employer in a subsequent year?

Position: No.

Reasons: The taxpayer cannot rely on subsection 152(4.2) as the initial assessment was correct in law.

13 February 2015 External T.I. 2014-0541961E5 - RPP and CPP payments-former employee of Consulate

CRA Tags
227(6), 212(1)(h), 115(2)(d), Treaties Article XVIII
CPP payments attributable to employment services performed while contributing

Principal Issues: Are RPP and CPP payments to non-resident former employees of an Embassy or Consulate exempt from Part XIII tax by virtue of the exception under subparagraphs 212(1)(h)(v) and (vi) of the Act?

Position: Yes

Reasons: The payments satisfy the exception in subparagraphs 212(1)(h)(v) and (vi).

12 February 2015 External T.I. 2014-0553351E5 - RPP payments-former employee of Embassy

CRA Tags
227(6), 212(1)(h), Treaties Article XIX, 115(2)

Principal Issues: 1. Are RPP payments to former employees of an Embassy exempt from tax by virtue of the exceptions under paragraph 212(1)(h) of the Act? 2. What are the procedures for a refund, if applicable, of the Part XIII withholdings?

Position: 1. Yes 2. Taxpayers may apply for a refund of withholding taxes by completing form NR7-R

Reasons: In the hypothetical situation, the taxpayer was a non-resident of Canada throughout the period the taxpayer was employed at an Embassy in the United States in respect of the RPP benefits. Since the taxpayer satisfied both of the conditions in subparagraphs 212(1)(h)(v) and (vi), the RPP payments are exempt from tax under paragraph 212(1)(h) of the Act.

6 February 2015 External T.I. 2014-0542281E5 - Foreign affiliate - prescribed foreign accrual tax

CRA Tags
ITR 5907(1.3), ITR 5907(1.5), ITR 5907(1.4), ITR 5907(1.6)
both 5907(1.4) and (1.5) apply on year-by-year basis

Principal Issues: 1) When determining whether an amount paid in a particular taxation year of a foreign affiliate can reasonably be considered to be in respect of a foreign accrual property loss for the purposes of subsection 5907(1.4) of the Regulations, may future taxation years be considered? 2) When an amount is reinstated as foreign accrual tax by subsection 5907(1.5) in a particular taxation year of a taxpayer, can the subsection 91(4) deduction nevertheless be claimed in a previous taxation year of the taxpayer?

Position: 1) No 2) No

Reasons: 1) The determination of whether subsection 5907(1.4) applies has to be made based on the information available at the time it is being applied. Subsections 5907(1.5) and (1.6) provide rules that take into account later taxation years and allow for reinstatement of amounts previously denied by 5907(1.4) when intended. 2) Subsection 5907(1.5) determines the taxation year of the taxpayer to which the foreign accrual tax pertains.

3 February 2015 External T.I. 2014-0531601E5 - OPSTC - "tangible property that is leased"

CRA Tags
Ontario Taxation Act 92(5.6)

Principal Issues: For purposes of the Ontario Production Services Tax Credit, does a reference to the term "lease" refer to the commercial meaning of this term? Under common law, a lease normally confers exclusive possession while a license normally would not.

Position: Yes.

Reasons: In Will-Kare Paving & Contracting Limited vs. The Queen, the Supreme Court enunciated the principle that the plain meaning of terms cannot be used in place of well-defined commercial terms.

20 January 2015 External T.I. 2014-0560961E5 - Treatment of creditor that has seized property

CRA Tags
79(1), 79.1(1), 79.1(6)
general principles apply to gain on sale of foreclosed property

Principal Issues: 1) How is the cost of seized property determined? 2) Is a gain arising on the disposition of seized property by a creditor on income or capital account?

Position: 1) If applicable, subsection 79.1(6) determines cost. 2) Depends on facts and circumstances of a particular situation.

Reasons: Application of the law.

16 December 2014 External T.I. 2014-0539841E5 F - Testamentary Trust

CRA Tags
248(9.1), 108(1) "testamentary trust", 248(8)
transfer from one testamentary trust to another pursuant to a will direction treated as a non-tainting contribution from the deceased
subsequent will-directed transfer from spousal trust to residue trust occurred as consequence of death

Principales Questions: Whether a trust retains its testamentary status if it receives property from another testamentary trust following the death of the first generation beneficiary?

Position Adoptée: Question of fact. Generally, a transfer of property from one testamentary trust to another does not disqualify the second trust from being a testamentary trust within the meaning of subsection 108(1) since the property is contributed to the second trust by the deceased person, through specific directions given in that person's will.

Raisons: Based on our interpretation of the definition of "testamentary trust" in subsection 108(1) and consistent with our positions in previous technical interpretations.

Technical Interpretation - Internal

10 November 2014 Internal T.I. 2014-0532801I7 - film or video production services tax credit

CRA Tags
125.4, 125.5(2)(d), 125.5(1) "eligible corporation production"

Principal Issues: whether paragraphs (a) and (b) of the "eligible production corporation" definition are relevant in determining whether the activities of a corporation are primarily those of a film or video production services business for purposes of that definition; whether particular expenditures are considered to be part of a film or video production services business for purposes of the "eligible production corporation" definition

Position: no; question of fact

Reasons: application of the Act