Income Tax Severed Letters - 2016-05-04


2016 Ruling 2015-0605851R3 F - Partners creating professional corporation

CRA Tags
125(7), 103(1), 245

Principales Questions: Will the fees earned by a professional corporation created by a partner in order to provide professional services to a partnership, as an independent contractor, be considered to be specified partnership income?

Position Adoptée: Question of fact. Generally no, if certain conditions are met.

Raisons: Consistent with prior Rulings.

2015 Ruling 2014-0542411R3 - Carrying on business in Canada and PE

CRA Tags
2(3), 253, ITR 105, Treaties Article V
PE in Canada of ForCo avoided through seconding employees to its Cdn sister and meeting in Canada up to 90 days annually only offsite
payroll reimbursement payments under employee secondment arrangement not subject to Reg. 105
seconded employees respected as employees notwithstanding their payroll is paid by (and reimbursed to) ForCo
no mark-up on cross-border payroll reimbursement represented to accord with s. 247

Principal Issues: (1) Whether the secondment arrangement between a non-resident corporation and a related Canadian corporation causes the non-resident corporation to be considered to render services in Canada for purposes of Regulation 105; (2) Whether the non-resident corporation is carrying on business through a permanent establishment, as defined in Article 5 of the Canada-XXXXXXXXXX Treaty, situated in Canada.

Position: (1) No; (2) No.

Reasons: (1) The conclusion is consistent with our prior positions that the provision of employees by a non-resident corporation under a secondment arrangement, where the non-resident is reimbursed at cost and no mark-up is charged, does not cause the non-resident corporation to be rendering services in Canada for purposes of Regulation 105; (2) The conclusion in respect of the secondment arrangement is consistent with our prior positions that the provision of employees under a secondment arrangement does not cause a non-resident corporation to be carrying on a business in Canada. The subcontracted activities of the non-resident will not meet the permanent establishment threshold in Article 5 of the Canada-XXXXXXXXXX Treaty.

2015 Ruling 2014-0550611R3 - Permanent Establishment

CRA Tags
Treaties Article V
home of a Canadian employee doing marketing (but no contracting) for a U.S. employer is not a PE of the U.S. employer

Principal Issues: Whether a particular non-resident corporation will be considered to be carrying on business in Canada through a permanent establishment in Canada as a result of the corporation having hired a Canadian resident employee to provide services from his home in Canada.

Position: No.

Reasons: Determinations as to whether a non-resident person carries on business in Canada through a permanent establishment in Canada is a question of fact; however, based on the facts as submitted, we are of the view that the hiring of a Canadian resident employee, in and of itself, will not cause the non-resident person in question to be considered to be carrying on business in Canada through a permanent establishment.

2015 Ruling 2014-0554411R3 - Loss consolidation

CRA Tags
20(1)(c), 112, 245

Principal Issues: Is the loss consolidation acceptable?

Position: Yes.

Reasons: The proposed transactions conform to our requirements for loss consolidation structures.

2015 Ruling 2014-0563171R3 F - Reorganization - subsection 55(2)

CRA Tags
55(2), 55(3)(b)

Principales Questions: Whether the proposed transaction qualifies for the butterfly exemption found in paragraph 55(3)(b).

Position Adoptée: Yes.

Raisons: The proposed transaction meets the statutory requirements.

2015 Ruling 2015-0584151R3 - Conversion of Contributed Surplus to PUC

CRA Tags
84(1), 89(1), 261
cross-border inbound continuance of corporation with different labels for capital and surplus followed by conversion of capital surplus to stated capital
corporate PUC and capital surplus flowed through on a cross-border continuance

Principal Issues: Whether share premium arising from share issuances governed by foreign corporate law is contributed surplus for purposes of paragraph 84(1)(c.3) that can be added to PUC without giving rise to a deemed dividend under subsection 84(1).

Position: Yes.

Reasons: Consistent with previous published positions.

2014 Ruling 2013-0494711R3 - Public Body Ruling

CRA Tags

Principal Issues: Is the Tribal Council a public body performing a function of government within the meaning of paragraph 149(1)(c)

Position: yes

Reasons: The Tribal Council is considered a public body and is performing a function of government.