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.
5-933145
XXXXXXXXXX
C. R. Brown
(613) 957-8953
Attention: XXXXXXXXXX
November 5, 1993
Dear Sirs:
RE: Scientific Research and Experimental Development (SR & ED) - Treatment of Contract Payments
This is in reply to your letter dated October 21, 1993 wherein you requested our opinion as to whether a payment made by a particular foreign entity, that is not subject to tax in Canada, in respect of SR & ED expenditures incurred by a Canadian corporation ("Canco") would be considered as a contract payment for purposes of computing Canco's investment tax credit pursuant to paragraph 127(11.1) of the Income Tax Act (the "Act").
It is our opinion that if the foreign entity is not carrying on business in Canada, it is not entitled to a deduction under clause 37(1)(a)(ii)(D) of the Act in respect of the amounts paid to Canco.
As such, the amount received by Canco from the foreign entity would not constitute a "contract payment" as this term is defined in subsection 127(9) of the Act.
We trust these comments will be of some assistance.
Yours truly,
for Director
Manufacturing Industries, Partnerships
and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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