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.
This is further to your memoranda of February 16, March 4 and March 9, 1982 in connection with whether the above entities are either corporations for purposes of the foreign affiliate rules or partnerships, as claimed.
Limitada:
In connection with the "limitada" we offer the following comments which generally support your contention that it is a "corporation".
- (1) Paragraph 3 of IT-343R dated September 26, 1977 refers to this type of entity which is found in most of the Latin American countries. The Department recognizes that such entities may not have all of the essential characteristics of corporations set up in Canada but are sufficiently similar to be regarded as such for purposes of our Act.
- (2) The enclosed material has been photocopied for your information only. These international C.A. firms have provided the material to us for our research purposes. Based on our review, we must recognize that a limitada has attributes of both a corporation and a partnership. However, a limitada is nevertheless recognized as a corporation under Brazilian law being subject to similar rules governing other types of corporations permitted in Brazil. This type of entity is separate and distinct from the 4 different types of partnerships recognized under Brazilian law. As well, the quotas appear to have attributes similar to our private company shares including a limited liability feature, a holder not being held liable for company debts if his capital is fully paid as well as the restrictions on transferability.
- Additionally, the Brazilian income tax law seems to tax the limitada and not the quotaholders separately in respect of a particular share of the income allocated, being a characteristic of a corporation. The quotaholders may receive dividends separately.
- (3) The charter of the limitada also appears to support the view that it is a corporation, being referred to as such throughout. It has capital stock, unlimited life as well as other features similar to closely held private corporations in Canada.
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© Her Majesty the Queen in Right of Canada, 1982
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© Sa Majesté la Reine du Chef du Canada, 1982
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