Principal Issues: (a) Is the business carried on by a corporation considered to be engaged in the provision of services? (b) Will the shares of the corporation qualify as excluded shares?
Position: General comments. (a) Determination will depend on the facts and circumstances of the business. Insufficient facts provided. Payment for the right to download a digital product that traditionally would have been sold to the customer as a tangible property, will generally be treated as a sale of intangible property and not a provision of a service unless the facts and circumstances dictate otherwise. For instance, the portion of the business income of a corporation for a taxation year generated by the following activities will generally be from the provision of services rather than provision of intangible property for the purposes of the TOSI rules: payments obtained as consideration for after-sales service; payments for services rendered by a supplier under a guarantee, and payments for pure technical assistance (b) Remains a question of fact.
Reasons: Legislation and previous positions.
