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.
5-910193
Dear Sirs:
Re: 24(1)
This is in reply to your letter of January 22, 1990 wherein you requested we reword the opinion expressed in our letter of December 18, 1990 to basically change the term "which is a resident of the United States" to "which is resident in the United States" in line with the wording in paragraph 1 of Article XXI of the Canada-U.S . Income Tax Convention.
As a result of several enquiries concerning the residency status of exempt organizations created in a country with which Canada had a tax treaty, the matter was reviewed by this Division.
After consulting with the Department of Finance and some of our treaty partners we have taken the position that exempt organizations can be and were intended to be residents of a Contracting State for purpose of Canada's tax treaties. As a result, such entities will be entitled to the same benefits provided under a tax treaty to other residents of that state and it does not matter whether the words "resident of" or "resident in" are used in the tax treaty. In view of the above interpretation we are of the opinion that it is not necessary to change the wording set out in our letter of December 18, 1990. However, we are prepared to issue the amended interpretation you requested to put the wording in line with paragraph 1 of Article XXI of the Convention. The revised wording is as follows:
"Any income or taxable capital gains derived by a charitable organization described in paragraph 1 of Article XXI of the Convention, which is resident of the United States, will be exempt from tax in Canada by virtue of that paragraph to the extent such income and capital gains are exempt from tax in the United States and provided that paragraph 3 of Article XXI of the Convention does not have application to such income or capital gains".
It should be noted that the charitable organization must qualify as a resident of Canada or the United States in order to fall within the wording of Article XXI of the Convention.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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