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 or not a Kazakh Limited Liabilities Partnership is considered to be a corporation for puroses of the Income Tax Act
Position:
Would be considered to be a corporation
Reasons:
A review of the legislation indicates that a Limited Liabilities Partnership would be a separate legal entity in line with the comments in IT-343
XXXXXXXXXX
962459
XXXXXXXXXX David R. Senécal
Attention: XXXXXXXXXX
July 30, 1996
Dear Sirs:
Re: Limited Liability Partnerships - Kazakhstan
This is in reply to your letter of July 29, 1996, wherein you request our opinion as to the tax status in Canada of an Economic Partnership set up in the form of a "Limited Liabilities Partnership" pursuant to Chapter III of the Decree of the President of the Republic of Kazakhstan on "Economic Partnerships" dated May 2, 1995.
Our review of the above legislation indicates that a LLP has many characteristics of a corporation. For instance, a LLP has the status of a legal entity under Kazakh law, the property of a LLP belongs to it on the ownership basis and the participants are not held liable for a LLP's obligations and run the risk of incurring losses only to the extent of their contributions to the LLP_ Authorized Fund. On the other hand, it is possible for a particular LLP to possess certain important attributes which are not indicative of a corporate entity. For example, it is possible for a LLC to be formed for only a very brief period of time. Consequently, while we are of the view that a LLP formed pursuant to the above-mentioned Decree would normally be considered to be a corporation for purposes of the Income Tax Act (the "Act") and, in particular, for the purposes of the definition of a "foreign affiliate" in subsection 95(1) thereof, there may be instances where a particular LLP may be established in such a manner as not to qualify as a corporation for purposes of the Act. Therefore, a decision in this regard with respect to any particular LLP can only be made once all of the facts and documentation regarding its formation are known to us.
Where a LLP is considered to be a corporation, our administrative position set out in IT-392 (Meaning of the Term "Share") would apply. As such, a LLP would be viewed as having capital stock of 100 issued shares and each owner of a beneficial interest in the LLP will be considered to own a number of shares proportionate to his beneficial interest in the LLP.
Having said this, we wish to point out that the Ministry of Foreign Affairs of the Republic of Kazakhstan has informed the Canadian Government in a diplomatic note dated May 26, 1995, of its intention to terminate the income tax treaty between Canada and the former U.S.S.R. as it relates to Kazakhstan effective December 31, 1995. While we understand that a new income tax convention between Canada and Kazakhstan is currently under negotiation and that its effect is intended to be retroactive to January 1, 1996, there is no way of knowing if or when the new convention will be signed and, more importantly, come into force. Consequently, the Department is unable to provide any assurance at this time as to whether the Republic of Kazakhstan would be considered a "designated treaty country" as defined in the proposed amendment to Regulation 5907(11).
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 and are not binding on Revenue Canada.
We trust that our comments will be of assistance to you.
In closing, we acknowledge your request that the advance income tax ruling sought in your letter of July 12, 1996, be withdrawn on the basis that you are unable to provide us with sufficient documentation at this time to enable us to proceed with our examination of the transaction proposed therein. As such, we have closed our file in this matter and our time charges to date will be invoiced to you under separate cover.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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