25 July 1995 External T.I. 9417375 - STICHTING CONSTITUE OU NON UNE CORPORATION

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.

Principales Questions:

est-ce qu'une Stichting constitue une corporation étrangère affiliée aux fins de 95(1)(d)

Position Adoptée:

non determinée

Raisons POUR POSITION ADOPTÉE:

aucune documentation pour analyser le type d'entité que constitue une Stichting

5-941737
XXXXXXXXXX Carole Pronovost
(613) 957-8953

Attention: XXXXXXXXXX

July 25, 1995

Dear Sirs:

Subject: Meaning of the term corporation - paragraph 95(1)(d) of the Income Tax Act (hereinafter the "Act")

This is in reply to your letter dated June 24, 1994 in which you requested our comments on whether a Dutch Foundation (STICHTING ADMINSTRATIEKANTOOR) is considered a corporation for purposes of the definition of foreign affiliate in paragraph 95(1)(d) of the Act.

The status of a Stichting, for Canadian tax purposes, can not be determined with any degree of certainty until we review the documentation that brought the entity into existence, the relevant foreign law pertaining to such an entity and the relationship between the owner (the person who causes the creation of the Stichting) and the Stichting (e.g. beneficiary\trustee, principal\agent, shareholder\corporation, partner\partnership, etc.), in general with respect to specific property transferred to the Stichting by the owner.

The term "corporation" is defined in subsection 248(1) of the Act to include "an incorporated company". A review of the Dutch legislation pertaining to "Stichting" would be necessary to make such a determination.

Where the Stichting is not "an incorporated company", reference should then be made to Interpretation Bulletin IT-343R (the "Bulletin"). Paragraph 2 of the Bulletin states:

"A corporation is an entity created by law having a legal personality and existence separate and distinct from the personality and existence of those who caused its creation or those who own it. A corporation possesses its own capacity to acquire rights and to assume liabilities, and any rights acquired or liabilities assumed by it are not the rights or liabilities of those who control or own it. As long as an entity has such separate identity and existence, the Department will consider such entity to be a corporation even though under some circumstances or for some purposes the law may ignore some facet of its separate existence or identity."

Based on the facts surrounding each case, it is possible, regardless that the Stichting may be a corporation for Canadian tax purposes, that certain assets may be held by a Stichting as trustee1 or bare trustee.²

It is our view that this issue is essentially legal one upon which we are unable to assist you without further information.

We regret that we cannot be more helpful.

Yours truly,

for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

ENDNOTES

¹ For example, see Interpretation Bulletin IT-216 and Advanced Tax Ruling ATR-1.

² The Department would normally view a bare trust to exist where there is a trust under Canadian common law and the trustee (e.g. the Stichting) has no significant powers or responsabilities, and can take no action regarding the property held by the trust without instructions from the settlor. Normally the trustee's only function is to hold legal title to the property. Furthermore, the settlor is also the sole beneficiary and can cause the property to revert to him at any time. The Department's position regarding bare trusts was discussed in a paper given at the 1989 Corporate Management Tax Conference.