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:
Personal Services Business and whether a person includes
a foreign corporation
Position:
A foreign corporation is a person and a corporation for
purposes of the Act
Reasons:
Definition of person
XXXXXXXXXX 963605
Attention: XXXXXXXXXX
December 17, 1996
Dear Sirs:
Re: Personal Services Business
This is in reply to your letter of October 16, 1996 in which you request a technical interpretation with respect to the definition of a personal services business.
The situation described in your letter is an actual fact situation and written confirmation of the tax implications inherent in proposed transactions are given by this Directorate only where the transactions are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R2. Where a completed transaction is involved, the enquiry should be addressed to your local District Tax Services Office. Consequently, we can only offer the following general comments.
Whether or not a particular corporation is a personal services business is a question of fact to be determined from an examination of all the facts. However, under subsection 125(7) of the Income Tax Act (the "Act"), a corporation is considered to be carrying on a personal services business if, among other factors, an individual performs services on behalf of the corporation (the "incorporated employee") and the incorporated employee or a person related thereto owns 10% or more of the shares of the corporation and the incorporated employee would otherwise, but for the existence of the corporation, reasonably be regarded as an employee or officer of the person who received the services from the corporation, unless the corporation employed, throughout the year, more than five full time employees in the business or the services were performed for a corporation with which it was associated.
Pursuant to subsection 248(1) of the Act, "person" is defined as;
"... includes any corporation and any entity exempt, because of subsection 149(1), from tax under Part I on all or part of the entity's taxable income and the heirs, executors, administrators or other legal representatives of such a person, according to the law of that part of Canada to which the context extends;"
In our opinion, a foreign corporation is a "corporation" and a "person" for purposes of the Act.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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