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.
We are writing in response to your memorandum dated June 20, 1989 asking us to review a draft letter (a copy of which is attached hereto) responding to a letter dated May 23, 1989 from XXX. We have reviewed the draft letter and have only two comments.
First, we suggest that you replace the words "no tax consequences" in the second line of the fourth paragraph of the draft letter with the words "generally no tax consequences".
Second, we suggest that you consider adding the following paragraph as the final paragraph of your letter:
- "For the purposes of the ITA, paid-up capital has the meaning assigned by paragraph 89(1)(c) of the ITA. Generally, the paid-up capital of the Canadian holding company will, for these purposes, be equal to its capital under the relevant corporate laws, in this case, the corporate laws of the Province of British Columbia. However, depending upon the particular circumstances, the paid-up capital may be less than the capital under the relevant corporate laws. For example, where shares of the Canadian holding company were issued to the German corporation as consideration for the transfer to the Canadian holding company of shares of the second tier Canadian company and the capital of the shares of the Canadian holding company so issued exceeded the paid-up capital of the shares of the second tier Canadian company, the paid-up capital of the shares of the Canadian holding company so issued would be equal to the paid-up capital of the shares of the second tier Canadian company. Or, for example, where shares of the Canadian holding company were issued to the German corporation as consideration for the transfer to the Canadian holding company of other property (having a tax cost that was less than the fair market value of the property) without recognizing, on such transfer, any gain on such property for Canadian tax purposes and the capital of the shares of the Canadian holding company so issued exceeded the tax cost of the property, the paid-up capital of the shares of the Canadian holding company so issued would be equal to the tax cost of the property. Paid-up capital would also not include any accumulated profits or retained earnings of the Canadian holding company that have not been added to its capital under the corporate laws of the Province of British Columbia."
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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