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.
951478
XXXXXXXXXX Olli Laurikainen
(613) 957-2116
Attention: XXXXXXXXXX
July 5, 1995
Dear Sirs:
Re: Foreign Affiliates - "Specified Deposits"
This is in response to your letter dated May 25, 1995, wherein you request our opinion whether a deposit made by a foreign affiliate in the following circumstances would qualify as a "specified deposit" as defined in proposed subsection 95(2.5) of the Act as set out in Bill C-70.
1) FA is a wholly-owned foreign affiliate of Canco, a corporation resident in Canada.
2) FA carries on an activity that results in income from sources in a country other than Canada which would be income from property except that proposed subparagraph 95(2)(a)(i) of the Act applies such that the income is included in the income of FA from an active business.
3) FA makes a deposit with a prescribed financial institution resident in Canada with funds that are temporarily excess to the activity referred to in paragraph 2) above.
You question whether the deposit referred to in paragraph 3) above would meet the definition of "specified deposit" set out in proposed subsection 95(2.5).
In order to qualify under the definition of a "specified deposit", paragraphs (a) and (b) in proposed subsection 95(2.5) require that the income from the deposit under consideration would, but for proposed paragraph 95(2)(a.3), be income from an active business carried on by the foreign affiliate. Under the facts of the case above, certain income of FA is included in computing its income from an active business but FA does not carry on an active business. Therefore, it is our view that the deposit referred to in paragraph 3) above would not be a "specified deposit" as defined in proposed subsection 95(2.5).
We trust this is the information you require.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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