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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
April 27,1993
Mr. E.E. Campbell Foreign Section
Acting Director D. Patrick
Provincial and International 957-8953
Relations Division
Attention: B. Fioravanti
931083
New York Franchise Tax on Transportation and Transmission Corporations (the "Franchise Tax")
This is in response to your handwritten note concerning an inquiry from External Affairs on the deductibility of the Franchise Tax for the XXXXXXXXXX ("Truckers") who carry on business in New York State.
It is our understanding that the tax is imposed on the Truckers' gross worldwide earnings, multiplied by a fraction, the numerator of which is the taxpayer's mileage within the state, and the denominator is the taxpayers total world wide mileage. It is also our understanding that the above noted formula is operative even if there is no net income earned by Canadian truckers on their world-wide income.
It is our opinion that this particular tax is not an "income or profits tax" for purposes of paragraph 126(7)(a) of the Income Tax Act (Canada) (the "Act"), with the result that Truckers cannot claim a foreign Tax credit with respect to such taxes which are paid to New York State.
Even though a foreign tax credit is not available pursuant to section 126 of the Act, it is our opinion that any non-refundable taxes paid by members of the XXXXXXXXXXwould be deductible in the computation of their taxable income in Canada pursuant to paragraph 18 (1)(a) of the Act as being an outlay or expense incurred for the purpose of gaining or producing income from the business or property.
M.A.G. Hiltz Director Reorganizations and Non-resident Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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