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.
DATE JUN 2 1988.
Audit Directorate International Audits Division
Reorganizations and Non-Resident Division Foreign Section N.R. Mitchell 957-2134
J.A. Calderwood Director
"Partly Owned"; Paragraph 5 of Article XXV of the 1980 Canada - U.S. Income Tax Convention (the "Convention")
This is in reply to your memorandum of March 10, 1988. At issue are the following words in paragraph 5 of Article XXV of the Convention: "...the capital of which is wholly or partly owned or controlled...", in particular, the words "partly owned".
As you read it, an overview of the paragraph would seem to indicate that the intention was that "partly owned" would mean a controlling interest. On the other hand, you observe that "partly owned" could refer to a situation in which as few as one out of a million shares was owned by a resident of the other Contracting State. You question whether the latter situation was intended to be covered by the paragraph in question.
In our view, the plain meaning of the words "partly owned" would indeed extend to a situation in which only a small fraction of the capital of the company was owned by one or more residents of the other Contracting State. We do not agree that a degree of control is necessary before paragraph 5 of Article XXV of the Convention is triggered; such an interpretation would require one to ignore the express words "partly owned" in the provision and to read in a requirement which does not follow from a natural construction of its terms. Because of the use of the disjunctive "or" in the paragraph, the words "partly owned" do not need to be qualified by the words "wholly" or "controlled" which appear elsewhere in paragraph 5 of Article XXV of the Convention.
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