8 September 1992 Income Tax Severed Letter 9203675 - Foreign Affiliate - Services Rendered to Shareholder

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.

920367
Olli Laurikainen
(613)957-2116
24(1)

Attention: 19(1)
September 8, 1992

Dear Sirs:

Re: Paragraph 95(2)(b) and 95(3)(b) of the Income Tax Act (the "Act")

This is in reply to your letter dated January 31, 1992 wherein you inquired about the meaning of the phrase "services performed in connection with the purchase or sale of goods" in paragraph 95(3)(b) of the Act. Specifically, you inquired whether a provision in the Revenue Canada, Customs & Excise memorandum D13-4-12 ("D13-4-12") wherein the duties of a "Buying Agent" are defined would be useful in interpreting paragraph 95(3)(b) of the Act.

Paragraph 6 of D13-4-12, lists: "finding suppliers, informing the vendor of the desires of the purchaser, placing orders, collecting samples, inspecting goods and, in some cases, arranging for the insurance, transport, storage or delivery of the goods" as duties of a purchasing agent. In our view those duties would generally be considered services that are performed in connection with the purchase of goods.

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However, whether an actual service performed by a controlled foreign affiliate of a taxpayer resident in Canada for the taxpayer or a person related to the taxpayer falls within paragraph 95(3)(b) of the Act is ultimately a question of fact. Therefore, while D13-4-12 appears to be of some assistance in interpreting paragraph 95(3)(b) of the Act, a final determination can only be made after examining the specific set of facts, of a particular case.

We hope the above is of assistance to you.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch

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