Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
This is in reply to your letter of December 2, 1980 concerning foreign affiliates.
Your situation involves X Limited, a corporation resident in Canada, that performs investment services in Canada. It has many employees and several billion dollars of investments under its management. X Limited is controlled by three individuals resident in Canada.
To provide the same investment service to U.S. clients, X Limited will incorporate a wholly-owned U.S. subsidiary (U.S. Co.) which will be a controlled foreign affiliate of X Limited and of each of the three individuals. Until such time as the volume of business justifies an office in the U.S., the services provided by U.S. Co. will be performed by the employee of X Limited including the three individuals who control X Limited.
In the circumstances herein described, subparagraph 95(2)(b)(ii) of the Act would be applied with the result that the service income of U.S. Co. would be deemed to be FAPI. However, if the U.S. income tax paid by U.S. Co. in respect of this FAPI amount is equal to or greater than the applicable Canadian tax rate, the FAPI included in the income of X Limited would be reduced to Nil by virtue of subsection 91(4) of the Act.
We regret that our reply could not have been more favourable.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1981
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1981
Email this Content