3 April 1998 Internal T.I. 9731947 - DEFINITION OF A CANADIAN VESSEL

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.

		April 3, 1998

	Outaouais Tax Services Office	HEADQUARTERS
B. Kerr
	Attention: Daniel St. Amour	957-2139
		973194

Definition of Canadian Vessel

This is in response to your memorandum of December 1, 1997, requesting our views on how much Canadian content is required in order for a ship to be considered a Canadian Vessel.

Our Comments

Since you have not defined what you mean by “Canadian content” or described your specific concern, we cannot address your specific query.

The term “vessel”, however, is defined in subsection 13(21) of the Income Tax Act to mean a vessel as defined in the Canada Shipping Act (the “CSA”). The CSA provides that a vessel includes any ship or boat or any other vessel used, or designed to be used, in navigation. Generally, vessels are included in Class 7 of Schedule II of the Income Tax Regulations (the “Regulations”) which has a capital cost allowance (“CCA”) rate of 15%. However, as stated in paragraph 5 of Interpretation Bulletin IT-267R2, Capital Cost Allowance - Vessels, paragraph 1100(1)(v) of the Regulations provides that an accelerated rate of CCA on a straight line basis at a maximum annual rate of 33 1/3% of the capital cost of property is available for certain properties. One of these properties, which are referred to as “Canadian Vessels” in the Bulletin, is a vessel described in subsection 1101(2a) of the Regulations that: was constructed in Canada; is registered in Canada; and had not been used for any purpose whatever before it was acquired by the taxpayer.

It is a question of fact, whether any particular vessel would be considered to be constructed in Canada. The word “constructed” is defined in the seventh edition of the Concise Oxford dictionary to mean “fit together, frame, build”, “thing constructed”. The word “in” is defined to mean “inclusion of position within limits of space, time, circumstance, etc., (in Europe, England, or any town, suburb, village, etc...)”. Therefore, in our view, a vessel would be considered to be constructed in Canada if the location of the shipbuilding factory at which it was built is situated within the boundaries of Canada.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at 613 957-0682. The severed copy will be sent to you for delivery to the client.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretation Directorate
Policy and Legislation Branch

- 2 -