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.
950561
XXXXXXXXXX Olli Laurikainen
(613) 957-2116
Attention: XXXXXXXXXX
June 28, 1995
Dear Sirs:
Re: Foreign Affiliates - Definition of "Investment Business"
This is in response to your letter dated February 27, 1995 wherein you requested clarification of the employee equivalency requirement in the above definition which is part of the proposed legislation set out in Bill C-70. You question whether a particular foreign affiliate is able to include the services provided to it by its own employees in making the determination of whether it employs "the equivalent of more than 5 employees full time in the active conduct of the business" in subparagraph (b)(ii) of the definition in circumstances where each of its employees spends a part of his or her time performing duties relating to another business of the particular affiliate or the business of related entities and no services of employees of related entities (i.e. referred to in clauses (b)(ii)(A) and (B) of the definition) are provided to the particular affiliate.
Yes, the particular foreign affiliate can include the services of its own employees in such circumstances. The particular affiliate will meet the test provided that it uses the equivalent of more than 5 employees full time in the active conduct of the business for the purposes of subparagraph (b)(ii) of the definition. It does not matter that those same employees have other duties or that the particular foreign affiliate does not have services performed for it by employees of other entities.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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