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:
Can "income or profits tax" for purpose of foreign affiliate rules include Canadian tax?
Position:
Yes.
Reasons:
Law. 961803
XXXXXXXXXX J. Stalker
Attention: XXXXXXXXXX
June 5, 1996
Dear Sirs:
Re: "Income or Profits Tax" for the purpose of the Foreign Affiliate Rules
We are writing in response to your letter dated May 13, 1996 in respect of the meaning of the term "income or profits tax" in the definition of "foreign accrual tax" in subsection 95(1) of the Income Tax Act (Canada) (the "Act") and in the definition of "underlying foreign tax" in paragraph 5907(1)(l) of the Income Tax Regulations (the "Regulations").
"Income or profits tax" for the purpose of the definition of "foreign accrual tax" in subsection 95(1) of the Act may include Canadian income tax paid by a foreign affiliate of a taxpayer if the tax may reasonably be regarded as applicable to an amount included in computing the taxpayer's income by virtue of subsection 91(1). Similarly, "income or profits tax" for the purpose of the definition of "underlying foreign tax" in paragraph 5907(1)(l) of the Regulations could include Canadian income tax paid by a foreign affiliate in respect of its taxable earnings.
The above comments represent our general views with respect to the subject matter of your letter. These comments do not constitute an advance income tax ruling and therefore, as described in paragraph 21 of Information Circular 70-6R2, are not binding on the Department.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and Interpretations Directorate
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