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.
Principal Issues:
Is a venture capital corporation an "eligible corporation" within the meaning of subsection 5100(1) of the Regulations if it is not also a prescribed venture capital corporation ?
Position TAKEN:
No.
Reasons FOR POSITION TAKEN:
Subsection 5100(1) of the Regulations specifically requires that the corporation must be a prescribed venture capital corporation within the meaning of section 6700 of the Regulations to qualify as an "eligible corporation".
941993
XXXXXXXXXX A. Seidel
Attention: XXXXXXXXXX
October 28, 1994
Dear Sirs:
This is in reply to your facsimile dated August 5, 1994 in which you requested an interpretation of the meaning of "eligible corporation" as defined in subsection 5100(1) of the Income Tax Regulations (the "Regulations").
Paragraph (e) of the definition of "eligible corporation" in subsection 5100(1) of the Regulations excludes a "venture capital corporation other than a prescribed venture capital corporation". "Prescribed venture capital corporation" has the meaning assigned by section 6700 of the Regulations and includes corporations incorporated under various provincial statutes and corporations that satisfy the requirements of section 204.81 of the Income Tax Act. The general focus of prescribed venture capital corporations is financial and/or managerial assistance to eligible business entities.
Since the term "venture capital corporation" is not defined for purposes of the Act, it must be given its normal meaning. Consequently, if a corporation, the principal business of which is to provide "risk" capital to small and medium-sized enterprises in connection with the start-up, development, expansion or turn-around of the enterprise, would normally be described as a venture capital corporation, it is our view that such a corporation would not be an eligible corporation within the meaning of subsection 5100(1) of the Regulations unless it is also a prescribed venture capital corporation within the meaning of section 6700 of the Regulations. Whether or not a corporation is afforded special tax benefits under provincial tax legislation other than the statutes included in section 6700 of the Regulations is not, in and of itself, determinative of whether or not the corporation is a venture capital corporation.
These comments are provided in accordance with the guidelines set out in paragraph 21 of Information Circular 70-6R2.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch
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