Income Tax Severed Letters - 2026-03-11

Technical Interpretation - External

29 December 2025 External T.I. 2025-1078091E5 - Application of GMTA to airline branch

Unedited CRA Tags
GMTA 2(1) "permanent establishment", 5, 11(1), 51, 60, 61

Principal Issues: A qualifying MNE group has a constituent entity resident in Jurisdiction A with a branch in Canada that operates aircraft in international traffic and is exempt from taxation in Canada under Article 8 of the tax treaty in force between Canada and Jurisdiction A. Is the qualifying MNE group liable to tax under the GMTA based solely on the operation in Canada of that branch, and is it obligated to file a GloBE Information Return ("GIR"), GIR notification, or Global Minimum Tax Return ("GMTR") (to report Parts 2 and 3 taxes payable) in accordance with the GMTA?

Position: Based on the limited facts provided, there is no liability to pay tax under Parts 2 and 3 of the GMTA, and there is no obligation to file a GIR, GIR notification, or GMTR in Canada in respect of the MNE group.

Reasons: There are no constituent entities in the qualifying MNE group that are located in Canada: the constituent entity resident in Jurisdiction A is located outside of Canada, and the branch operating in Canada is not treated as a "permanent establishment" for GMTA purposes.

15 December 2025 External T.I. 2025-1062551E5 F - Relevant Group Entity

Unedited CRA Tags
84.1(2.3) ; 84.1(2.31)(c)(iii) ; 110.6(1) "qualified small business corporation share" ; 125(7) "specified investment business" ; 129(6) ; 248(1) "active business" "small business corporation" ; 256(5.1) ; 256(5.11).
Summary Under
Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(2.31) - Paragraph 84.1(2.31)(c) - Subparagraph 84.1(2.31)(c)(iii)
the s. 129(6) income recharacterization rule is not relevant to whether a corporation carries on an active business for purposes of being a relevant group entity
Summary Under
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1)
being the lessor to the subject corporation likely does not signify de facto control

Principales Questions: 1) In a given scenario, whether two corporations would be "relevant group entities", with respect to the sale of subject shares? ; 2) Whether the fact that a parent retains control of a corporation that owns the building that is used in the business of a relevant group entity would invalidate the exception sought under subsection 84.1(2.31)?

Position: 1) No, provided the two corporations do not carry on an active business at the disposition time ; 2) General comments provided. Depending on the facts, if it is concluded that the parent retains de facto control of the relevant group entity, the transfer would not satisfy the requirements in subparagraph 84.1(2.31)(c)(iii).

Raisons: The Law.

22 August 2025 External T.I. 2021-0904251E5 F - Taxation of interest from French tax-free accounts

Unedited CRA Tags
2(1), 2(2), 12(1)(c), 12(4), 233.3, 233.7, 248(1) definition "cost amount", Article 11 of the Canada-France Income Tax Convention

Principal Issues: 1. Is interest from certain accounts that are tax-exempt or tax-advantaged in France (livret jeune, livret bleu, livre développement durable et solidaire (LDDS), compte épargne logement (CEL), and compte capital expansion) taxable in Canada for an individual resident of Canada? 2. Do these investments need to be declared on form T1135? 3. When does the T1135 filing obligation begin for a deemed resident?

Position: 1. Yes. 2. Yes, if the $100,000 cost amount threshold is met in the year. 3. The T1135 must be produced starting with the tax year following the year when the taxpayer first became resident in Canada, and submitted by the deadline for the taxpayer’s income tax return.

Reasons: 1. Yes, an individual resident of Canada must generally include in income all worldwide income, including interest earned on foreign accounts, unless the interest is specifically exempted under the Act or under a tax treaty. 2. Foreign property must be declared on Form T1135 if the aggregate cost amount of property held by the taxpayer exceeds the statutory threshold for the year, which is $100,000. 3. Form T1135 must be filed for every year following the first year when the individual became a resident of Canada and the $100,000 threshold is met.

Technical Interpretation - Internal

12 November 2025 Internal T.I. 2025-1080641I7 - Regulation 105

Unedited CRA Tags
Paragraph 153(1)(g); subsection 153(1.1); Regulations 105(1) and 200(1).

Principal Issues: 1. Whether the payment for services rendered in Canada by a U.S. government department are subject to withholding under Regulation 105(1) and whether a T4A-NR must be issued. 2. Whether the answer to question 1 changes when the services are performed by contractors hired by the U.S. government department, assuming that the payment for such services is made to the U.S. government department. 3. Whether the rate of withholding in the described scenario is 15% or a reduced rate. 4. Whether a U.S. government department is able to apply for a treaty-based waiver.

Position: 1. Yes. 2. No. 3. 15% unless otherwise authorized by the CRA. 4. Possibly.

Reasons: 1. Paragraph 153(1)(g) and Regulation 105(1) require that a payer of amounts for services rendered by a non-resident in Canada withhold 15% of the amount and Regulation 200(1) requires the preparation of a T4A-NR. 2. As the payment is made to a non-resident for services rendered in Canada, it does not matter if the non-resident performs the services itself or hires a contractor to perform the services. 3. The rate of withholding is specified in Regulation 105(1) and can only be reduced through the issuance by the CRA of a waiver in accordance with subsection 153(1.1) or through a written authorization from the CRA in the case of sovereign immunity. 4. We do not have sufficient information to determine whether the Canada-U.S. treaty would provide relief but it is possible.