Income Tax Severed Letters - 2023-01-18

Principales Questions: Quelles sont les périodes d’admissibilité touchées par le versement de dividendes imposables par une entité admissible qui est une société cotée en bourse ou une filiale de celle-ci à un particulier qui est détenteur d’actions ordinaires de son capital-actions? / What are the qualifying periods affected by the payment of taxable dividends by a qualifying entity that is a publicly trade company or a subsidiary of such company?

Position Adoptée: Dans l’exemple soumis, la filiale canadienne n’aura droit à aucun montant de PRTA pour la vingt-septième période d’admissibilité en vertu du paragraphe 125.7(2.01) si elle a versé des dividendes imposables au cours de cette période d’admissibilité à des particuliers qui sont détenteurs d’actions ordinaires de son capital-actions. Tout montant de dividendes imposables versés au cours de la vingt-quatrième période d’admissibilité et de toute période d’admissibilité ultérieure par la filiale canadienne à des particuliers qui sont détenteurs d’actions ordinaires de son capital-actions est de plus visé par le paragraphe b) de l’élément A du paragraphe 125.7(14.1). / In the given example, the Canadian subsidiary will not be entitled to any THRP amount for the twenty-seventh qualifying period under subsection 125.7(2.01) if it paid taxable dividends in that qualifying period to individuals who are holders of common shares of its capital stock. Any amount of taxable dividends paid in the twenty-fourth qualifying period and any subsequent qualifying period by the Canadian subsidiary to individuals who are holders of common shares of its capital stock is furthermore subject to paragraph (b) of the element A in subsection 125.7(14.1).

Raisons: Conformément aux dispositions de la Loi et positions antérieures / In accordance with the provisions of the Act and previous positions.

Principales Questions: What are the CRA’s current views on situations where loans are received by a limited partner from a limited partnership that have a purpose of avoiding a gain that could be realized under subsection 40(3.1) of the Income Tax Act?

Position Adoptée: See below.

Raisons: See below.

Principal Issues: In the situation where an employee, resident in Quebec, reports for work at the establishment of his employer in Quebec two days per week and works remotely from his vacation home in Ontario three days per week: 1) Would the employer be deemed to have a permanent establishment in Ontario, namely at the location of the employee’s vacation home? 2) In the affirmative, would the employee be considered to report for work at an establishment of his employer in Ontario for withholding purposes? 3) Did the CRA's position evolve on similar situations, in the context where remote working arrangements are becoming predominant?

Position: 1) Question of facts.
2) No.
3) General comments provided.

Reasons: 1) The fact that an employee has the authority to contract for his employer from a home office should not on its own create a permanent establishment in a given province. In other words, for the deeming provision in paragraph 400(2)(b) of the Regulations to apply, the employee is required to have the general authority to contract for his employer and the employer must also carry on business in that province through that employee established therein.
2) The definition of "permanent establishment" and the deeming provisions in subsection 400(2) of the Regulations are only relevant to Part IV of the Regulations.
3) The CRA is actively continuing its work on the matter.

Principal Issues: (1) Whether an obligation is settled upon approval of a proposal or upon full payment under the proposal. (2) Whether income tax payable in relation to an amount to be included in a taxpayer's income resulting from the application of subsection 80(13) ITA is a provable claim covered by the proposal.

Position: (1) The obligation is settled at the time the proposal is approved; (2) Income tax liability in relation to a forgiven amount is included in income by virtue of subsection 80(13) is not a provable claim covered by a BIA proposal.

Reasons: The law.

Principales Questions: Whether the minister may, by virtue of subsection 165(3), vacate an assessment for the sole purpose of allowing, in accordance with the position described in question 2 of CRA document 2020-0874951I7, a change to the time when the first fiscal period of a taxpayer ends.

Position Adoptée: No.

Raisons: For the purposes of subsection 165(3), an assessment can only be vacated following the submission of additional information or conclusive arguments, which CRA did not have when the assessment was made, and which can demonstrate that the assessment is either not valid, namely an assessment that is not made in compliance with the procedural provisions of the Act, or incorrect, namely an assessment in which the amount of tax assessed is not based on the applicable provisions of the Act, correctly interpreted and applied to the relevant facts.

Principales Questions: (1) Whether subsection 73(1) can apply to the transfer of RRSP proceeds by the estate of the deceased annuitant to the surviving spouse? (2) Whether subsection 146(8.1) can apply to such a transfer where the surviving spouse is not a beneficiary of the estate?

Position Adoptée: (1) No. (2) No.

Raisons: (1) Subsection 73(1) only applies where the transferor is an individual other than a trust. (2) Subsection 146(8.1) requires the spouse to be a beneficiary under the deceased’s estate.