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.
XXX
This is in reply to your round-trip memorandum of February 6 concerning the proposed assessment by the Calgary D.O. of Part XIII tax on payments made from XXX the "bank").
The proposed assessment relates to the payment of fees that are purported to be finders fees. The Bank originally obtained a waiver from Calgary D.O. on the basis that it received the finders fees for service performed outside Canada. However, evidence uncovered by the Department indicates that the Bank is not the beneficial owner of the fee payments. The actual owners are not known at this time. On the basis of this misrepresentation the Calgary D.O. is proposing to withdraw the waiver and assess Part XIII tax pursuant to paragraph 212(1)(a).
We have previously dealt with this case in a memorandum to J.D. Barabash of Policy & Systems Branch. We advised him that the information presently available is insufficient for us to express a definitive opinion. However, we did agree that, as a result of the apparent misrepresentation made by the Bank and in view of the fact that no evidence had been provided to support the taxpayer's waiver, we are prepared to support a Part XIII tax assessment on the basin of the application of paragraph 214(3)(a) and subsection 212(2). A copy of our memorandum is attached.
With regard to the alternative proposed by the Calgary D.O. to assess the fee under paragraph 212(1)(a) as a "management or administration fee or charge", we are of the view that this is the weaker of the two proposals. The term "management or administration fee or charge" is not defined in the Act, but in general usage, it includes the functions of planning, direction, control, co-ordination, systems or other functions at a managerial level. Although it is not known with certainty what the fee is, if it is some sort of finders fees, we doubt whether it could be considered a "managment or administration" fee even if it was paid in a non-arm's length situation.
The submission sent to you from the Calgary D.O. is returned herewith.
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© Her Majesty the Queen in Right of Canada, 1981
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© Sa Majesté la Reine du Chef du Canada, 1981
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