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:
whether part-time employees are included in determining whether the "equivalent of more than 5 employees full time are employed" by a foreign affiliate in a business for the purposes of the investment business definition in s.s. 95(1).
Position:
yes
Reasons:
provided for in the law
XXXXXXXXXX 952625
Attention: XXXXXXXXXX
October 31, 1995
Dear Sirs:
Re: Investment Business Definition
This is in response to your letter dated October 4, 1995 in reference to the interpretation of the employee test in paragraph (b) of the definition of "investment business" in subsection 95(1) of the Income Tax Act (the "Act") under the following hypothetical situation.
1) Aco, and Bco are foreign affiliates of a resident of Canada. Each has a taxation year which ends on December 31.
2) Each of Aco and Bco carries on the business of real estate development and must therefore employ a sufficient number of employees in the active conduct of its business to satisfy the test in either subparagraph (b)(i) or (b)(ii) of the definition of "investment business" in subsection 95(1) of the Act, if the business is to be excluded from falling under that definition.
3) Ms. X is employed part-time by each Aco and Bco in the active conduct of their respective real estate development businesses. Ms. X works a full business day on each working day of each year subject to normal absences due to vacation and illnesses for either Aco or Bco.
4) A record is kept of Ms. X's activities and her remuneration is either paid by the foreign affiliate to whom her services of employment were rendered or by the other foreign affiliate which is then fully reimbursed by the foreign affiliate to whom her services of employment were rendered. During a particular taxation year Ms. X spent 80% of her time employed by Aco and 20% of her time employed by Bco in the active conduct of their respective real estate development businesses.
It is our view that for the purposes of the employee test in paragraph (b)(ii) of the "investment business" definition in subsection 95(1) for the taxation year in question, Ms. would count for a 0.8 employee equivalent in respect of the business of Aco and a 0.2 employee equivalent in respect of the business of Bco.
We trust the above 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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