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.

		950641
XXXXXXXXXX	T.B. Kuss

Attention: XXXXXXXXXX

March 10, 1995

Dear Sirs:

Re: Article 21 of the Canada-Australia Income Tax Convention

We are writing in reply to your letter dated March 7, 1995 requesting a technical interpretation regarding the application of Article 21 of the Canada-Australia Income Tax Convention (the "Convention") to the following hypothetical situation.

Background

• A corporation which is resident in Australia under the Convention realizes a gain on the disposition of shares of a corporation resident in Canada.
• The shares derive their value principally from Canadian resource property.
• Absent any relief under the Convention the sale is taxable under the Act.

Analysis and Discussion

It is our view that the phrase "items of income" found in paragraph 1 of Article 21 of the Convention includes capital gains. Canada's right to tax the above gain is then dependant on whether the gain is derived from sources in Canada, within the meaning of Article 21 of the Convention. Although this is a question of fact, in making such a determination we would not generally look to the situs of the underlying assets of the corporation, rather we would look to the location of the sale of the shares. One of the principal factors to consider would be where the contract was made between the parties to the sale.

We hope our comments are of assistance.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch