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.
This is in reply to our letter of March 11, 1985 in which you request our views as to whether certain income earned by a controlled foreign affiliate (FAPI) of a Canadian-controlled private corporation (CCPC), is in the nature of foreign accrual property income (FAPI).
The hypothetical situation is as follows:
1. FA a corporation incorporated and resident in a listed country, is a 51% owned controlled foreign affiliate of CCPC. The remaining 49% is owned by an arm's length party who is a non-resident of Canada.
2. FA acts as a foreign sales representative for a Canadian broadcaster (CCPC-II) that is related to CCPC by virtue of the provision of subsection 251(2) of the Income Tax Act (the Act.)
3. CCPC-11 pays a fair market value commission to FA based on sales of air time to foreign advertisers and for assistance in negotiation of advertising contracts with non-residents of Canada.
4. FA and CCPC have the same year end.
While the issue is always a question of fact it is our view that the services performed as described above by FA for CCPC-II would not be services performed in connection with the purchase or sale of goods and therefore those services would be considered to be services for the purposes of paragraph 95(2)(b) of the Act. Accordingly, the income from such services would be FAPI pursuant to the provisions of paragraph 95(1)(b) of the Act.
We trust that this information will be of assistance to you.
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© Her Majesty the Queen in Right of Canada, 1985
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© Sa Majesté la Reine du Chef du Canada, 1985
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