15 August 1997 External T.I. 9711265 - RESIDENCE OF SICAVS

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:

Residency Status of SICAVs for Tax Treaty Purposes

Position:

SICAVs are not residents of a Contracting State for treaty purposes. However, in the case of France, new amending Protocol will provide that SICAVs will be resident of France but only to the extent that their shareholders are liable to French tax on the income from the SICAV.

Reasons:

SICAVs are not liable to tax in their own right. Same position as for LLCs. We have already informed Luxembourg of our position.

	                               	971126
XXXXXXXXXX                            	David R. Senécal

Attention: XXXXXXXXXX

August 15, 1997

Dear Sirs:

Re: SICAVs - Canada-Luxembourg Income Tax Convention

This is in reply to your letter of October 29, 1996, wherein you request our department's views as to whether certain corporate entities established in certain European countries, including Luxembourg and France, for investment purposes and known as "sociétés d'investissement à capital variable" (SICAVs) were considered residents of their particular countries for treaty purposes. We apologize for the delay in responding to your enquiry.

It is our department's position that SICAVs, not being liable to taxation in their own right, are not considered by this department as being residents of a Contracting State within the meaning of that term as defined in paragraph 1 of the Residence Article of Canada's income tax treaties. In this regard, our department has informed the Luxembourg competent authority that we do not view SICAVs, constituted and established in Luxembourg, as being covered by the provisions of the Canada-Luxembourg Income Tax Convention. As a result, the Luxembourg tax authorities have informed our department that they will not entertain requests from SICAVs for certification of their residency status for purposes of the Convention between our respective countries.

However, it should be noted that, in the case of SICAVs constituted and established in France, an amending Protocol to the Canada-France Income Tax Convention has been signed by Canada and the French Republic on November 30, 1995, which provides that the definition of the term "resident of a Contracting State" in paragraph 1 of Article 4 of that Convention is to be expanded in a manner which will result in Canada treating SICAVs, which have their place of effective management in France, as residents of France but only insofar as their shareholders are liable to French tax on the income of the SICAVs in respect of which the benefits of the Convention are granted. It is expected that the Protocol will enter into force sometime this year.

If you are interested, once the Protocol enters into force, we would suggest that you contact our department's International Tax Directorate regarding any administrative requirements which must be met in order for qualifying French SICAVs to benefit from the lower withholding tax rates provided for in the Canada-France Income Tax Convention.

We trust that our comments will be of assistance.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch