Income Tax Severed Letters - 2024-07-10

Ruling

2024 Ruling 2023-0984281R3 - Remote services and permanent establishment

Unedited CRA Tags
Article 5 of the Canada-XXXXXXXXXX Treaty and Canada-XXXXXXXXXX Treaty; Article V of the Canada-XXXXXXXXXX Treaty.
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 5
ruling that using employees to provide on-line health services to non-resident patients from home offices in Canada does not create a PE in Canada

Principal Issues: (1) Whether the Taxpayers would be considered carrying on business in Canada. (2) Whether the Taxpayers would be considered carrying on business in Canada through a permanent establishment, as defined under the relevant income tax conventions.

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

Reasons: Based on the facts, as submitted, the provision of Services to non-resident clients by the Assigned Employees from their rental homes in Canada will cause the non-resident employers to be carrying on business in Canada, but will not cause the employers to be considered to be carrying on business in Canada through a permanent establishment.

2023 Ruling 2023-0961551R3 - Loss Consolidation Ruling

Unedited CRA Tags
20(1)(c), 112, 80, 245

Principal Issues: Whether a particular loss consolidation arrangement is acceptable. In this arrangement, Lossco obtains a daylight loan from a third party and uses the proceeds to purchase Newco Preferred Shares, which it sells to Profitco, its sub. Profitco issues Lossco an interest bearing note as consideration for Newco Preferred Shares. The main issues are whether Lossco would be entitled to apply existing non-capital losses against the interest income received on the interest bearing note; and whether Profitco would be entitled to deduct the interest expense paid on the note and the dividends received on the Newco Preferred Shares.

Position: Yes.

Reasons: The proposed transactions conform to our requirements for these types of loss consolidation rulings, in this case on the basis that the entities involved are related and affiliated. The proposed transactions would be legally effective and commercially plausible.

Conference

7 May 2024 Roundtable, 2024-1005781C6 - 2024 CALU RT - Q9 - Notifiable Transactions

Unedited CRA Tags
Subsection 237.4(3) of Income Tax Act

Principal Issues: What is the process that CRA follows to designate new transactions as a notifiable transaction?

Position: The Minister of National Revenue sends a letter to the Minister of Finance to designate proposed notifiable transactions. If the Minister of Finance agrees, she will write back to the Minister of Revenue to state her concurrence to the designation of the notifiable transaction.

Reasons: Under subsection 237.4(3), the Minister may designate for the purposes of this section, with the concurrence of the Minister of Finance, in such manner as the Minister considers appropriate, transactions or series of transactions.