23 November 1992 Income Tax Severed Letter 9221815 - A société en nom collectif is a partnership

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.

922181
24(1) G. Middleton
(613)957-2122

Attention: 19(1)

November 23, 1992

Dear Sirs:

Re: Société en Nom Collectif ("SNC")

This letter is in reply to your letter of July 15, 1992 in which you requested our views in respect of an SNC formed under the laws of France.

In our opinion, an SNC is a partnership for the purposes of the Income Tax Act (the "Act") whether or not it elects to be taxed as a corporation under the income tax law of France. As a result of this, a partner of an SNC who is resident in Canada (including a corporate partner), would be required to report his share of the world income or loss of the SNC in accordance with section 96 of the Act. With respect to the application of the Act and the Canada-France Income Tax Convention (1975) for such a partner, the SNC is neither a resident nor an enterprise of France.

Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information

If an SNC carries on business through a permanent establishment located in Canada, a non-resident partner will usually be subject to tax in Canada on his share of income from such business pursuant to subparagraph 115(1)(a)(ii) and subsections 2(3) and 96(1) of the Act.

As indicated in Interpretation Bulletin IT-183, a partner's "business-income taxes" and "non-business-income taxes", as defined in subsection 126(7) of the Act are considered to include the partner's share of any such taxes paid by the partnership. Accordingly, where an SNC is liable for any foreign income taxes in respect of its businesses carried on outside of Canada and has paid the taxes at the partnership level, a Canadian partner's proportionate share of the foreign taxes paid would be considered to be "business- income taxes" of the partner and he may be entitled to claim a foreign tax credit under subsection 126(2) of the Act. Furthermore, where the SNC is required to withhold foreign taxes on behalf of the partner in respect of distributions out of the SNC's profits, the partner may be entitled to claim a foreign tax credit under section 126 of the Act since the taxes withheld on the partner's behalf will generally qualify as either a "business-income tax" or a "non-business-income tax" of the partner. Of course, the partner's entitlement to claim any foreign tax credit mentioned above is subject to the other requirements and limitations under section 126 of the Act.

We hope these comments will be helpful.
Yours truly,

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

Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information