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.
Revenue Canada Round Table
Canadian Petroleum Tax Society Conference
June, 1994
Question No. 21
NET PROFITS INTEREST
At the 1988 CPTS conference, the Department was asked in Question 16 whether a net profits interest ("NPI") is a Canadian resource property, as defined in paragraph 66(15)(c) of the Act. The Department expressed the opinion that a NPI entitling the holder to share in the net proceeds of production and sale of oil or gas is a Canadian resource property by virtue of subparagraph 66(15)(c)(iv) of the Act. It went on to add that the existence of a right to share in other non-production sources of income (e.g., proceeds from sale of depreciables) would disqualify the NPI as a Canadian resource property. The Department did not identify how it would treat such a NPI for purposes of the Act.
How will the Department treat a NPI which includes a right to share in non-production sources of income for purposes of the Act?
Department's Position
The manner in which an NPI, which does not qualify as a Canadian resource property by virtue of the existence of a right to share in non-production sources of income, would be treated for purposes of the Act is a question of fact which would have to be resolved based upon all of the relevant facts of a given situation, in particular, with reference to the agreements, etc. which gave rise to the NPI. Where a particular NPI does not qualify as a Canadian resource property by virtue of the existence of a right to share in both income from production and income from non-production sources, no portion of such NPI would be considered as a Canadian resource property.
Author:A.A. Cameron
File:941034
Date:May 4, 1994
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