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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Small Business Corporation-Subsection 248(1)
This is in reply to your letter of January 20, 1993, requesting an opinion relating to the definition of Small Business Corporation as defined in subsection 248(1) which states:
"(a) used principally in an active business carried on primarily in Canada"
Facts relating to your hypothetical situation include the following:
100% of the business is clearly active
100% of fair market value of assets are used in an active business
The employees and the shareholders are all Canadian residents
The only office, address and telephone of the company are located in Canada
The company researches and develops technology which is its only saleable product. However, substantially all sales of the company occur outside Canada
You are concerned that, because this company sells products outside Canada, it could mean that the business would be considered not to be carried on primarily in Canada.
OUR COMMENTS
Whether the business is carried on primarily in Canada or some other place is a question of fact and in order to make such a determination, it is necessary to review all the facts surrounding a particular situation. Such a review is normally conducted by officials of the district taxation office. We are prepared, however, to make the following general comments which may be of assistance to you.
As a general rule a business that involves the sale or leasing of goods is usually carried on in the country where the corporation is resident, unless the business (or a part of it) is conducted by a virtually autonomous branch operation outside of Canada. Where a corporation's business involves the rendering of services, that business is carried on in Canada only to the extent that services are rendered in Canada, necessitating an apportionment of net business income on a reasonable basis.
The foregoing comments are given in accordance with the practice of providing opinions referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.
We trust that you will find our comments helpful.
Yours truly,
E. Wheeler for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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