News of Note
CRA provides a new Memorandum on the specialized IPP place-of-supply rules
Email this ContentCRA has published a new GST/HST Memorandum on the specialized rules respecting the place of supply of intangible personal property (IPP).
It gives, as an example of IPP relating to tangible personal property, an option to acquire TPP.
Those rules turn on the ordinary location of the TPP. It notes that as per Schedule IX, Pt. I, s. 4, the mutual agreement of the supplier and recipient as to the ordinary location of the TPP is determinative even where the property is actually located at a different place.
It notes that given the expansive definition of real property as it relates to the common law provinces, when it comes to the rules governing the place of supply of IPP relating to real property, there will be very few examples of such IPP. One example given is supplies of a vacation club membership relating to a number of vacation resorts.
It indicates that where real property is both situated in Canada and outside Canada, the proportion of the supply of the IPP that relates to the real property that is situated in Canada is considered to be made in Canada, while the proportion of the supply of the IPP that relates to the real property that is situated outside Canada is considered to be made outside Canada. This adoption of a bifurcated approach to the place of supply of the IPP appears to reflect an acceptance of Intrawest.
Neal Armstrong. Summaries of GST/HST Memorandum 3-3-5-1 “Place of Supply in a Province Specific Rules for Intangible Personal Property” January 2025 under New Harmonized Value-added Tax System Regulations, s. 22(1), s. 22(2), s. 9, s. 10, Schedule IX, Pt. I, s. 4, ETA s. 142(2).
We have translated 7 more CRA interpretations
We have translated a CRA interpretation released last week and a further 6 CRA interpretations released in February of 2001. Their descriptors and links appear below.
These are additions to our set of 3,097 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 24 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
| Bundle Date | Translated severed letter | Summaries under | Summary descriptor |
|---|---|---|---|
| 2025-01-29 | 28 November 2024 External T.I. 2024-1026331E5 F - Section 87 of the Indian Act | Other Legislation/Constitution - Federal - Indian Act - Section 87 | reserve residents generally can exempt their employment earnings by agreeing to perform over half of their duties from home |
| 2001-02-02 | 16 January 2001 External T.I. 2000-0009685 F - avantage - usage par l'actionnaire | Income Tax Act - Section 15 - Subsection 15(1) | no s. 15(1) benefit where aircraft of corporation is used for the personal benefit of its sole shareholder, who bears the cost and expenses |
| 25 January 2001 External T.I. 2000-0049565 F - PAIEMENTS FORFAITAIRES RETROACTIFS | Income Tax Act - 101-110 - Section 110.2 - Subsection 110.2(1) - Qualifying Amount | retiring allowance could qualify if paid pursuant to settlement agreement of an action, and could be specified portion if related to prior year’s lost income | |
| 22 January 2001 External T.I. 2000-0012025 F - cotisations sociales | Income Tax Act - Section 126 - Subsection 126(7) - Non-Business-Income Tax | Belgian social security contributions imposed on Belgian director’s fees (treated as self-employed earnings for Belgian purposes) were non-business-income taxes | |
| 24 January 2001 External T.I. 2000-0028895 F - Contingent de versement/perte | Income Tax Act - Section 149.1 - Subsection 149.1(1) - Disbursement Quota | investment of amount or depreciation in the investment is not the expending of an amount | |
| 17 January 2001 External T.I. 2000-0041375 F - REMBOURSEMENT DE PRIME/ENFANT INFIRME | Income Tax Act - Section 146 - Subsection 146(8.1) | s. 146(8.1) election and s. 60(l)(ii) transfer re bequest of RRSP to adult disabled child’s RRSP | |
| 23 January 2001 External T.I. 2000-0045445 F - DETTE D'UN ACTIONNAIRE - FIDUCIE | Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(b) | where Opco makes a loan to a wholly-owned trust, the shareholder of Opco does not deal at arm’s length with the trust | |
| Income Tax Act - Section 15 - Subsection 15(2) | where Opco makes a loan to a wholly-owned trust, the loan is included in the trust’s income assuming that an Opco shareholder did not deal with it at arm’s length with Opco |
Raiche – Court of Quebec finds that a suspended Quebec police officer had not severed his Quebec ties when he started living (except when in Quebec) with his son in Ontario
Raiche started living with one of his two sons in Petawawa Ontario when, in November 2015, he was suspended from his employment with the Quebec police force in connection with a criminal investigation of him. The suspension continued until his retirement at age 65 in September 2017. Jacques JCQ found that Raiche had not severed his residential ties with Quebec, given inter alia that he maintained significant ties with Quebec including owning two residential properties there which he did not rent out, including his home, which continued to hold all his furniture, and was used as the address for much of his correspondence and deliveries, and a home that he provided free of charge to his second son, significant continued voluntary support to his separated spouse there, frequent visits to Quebec, and continued holding of for example a Quebec driver’s licence and Quebec health card. Although acquitted of the criminal charges in 2018, he did not “return” to Quebec until 2020 after the completion of the ARQ audit of him.
In concluding that the taxpayer was resident in Quebec on December 31 of each of 2015 to 2018, Jacques JCQ stated:
Despite his presence in Ontario, Quebec constituted the only element in Mr. Raiche's life presenting a character of permanence and durability between 2015 and 2018. He settled there and maintained his ordinary mode of life with his network of social relations.
Neal Armstrong. Summary of Raiche v. Agence du revenu du Québec, 2024 QCCQ 7814 under s. 2(1).
CRA indicates that reserve residents generally can exempt their employment earnings by agreeing to perform over half of their duties from home
A status Indian performs his duties for an off-reserve employer (e.g., the federal government) more than 50% of the time from his reserve home pursuant to a telecommuting agreement. CRA indicated that this would satisfy Guideline 3, which exempts all employment income earned by a status employee resident on a reserve where more than 50% of the employment duties are performed there provided that there is a “formal hybrid work arrangement” (which need not be a written agreement “provided that the details of the arrangement are agreed and clearly understood by both the Employee and the employer”) requiring the employee to perform those duties (as to over 50%) at the agreed location (the reserve home) - whereas if the employee merely performs his “duties on a reserve for reasons of convenience,” such performance will not count towards the 50% rule. Furthermore, the 50% rule is inapplicable “where it is reasonable to consider that one of the principal reasons for the existence of an agreement mandating work at home on a reserve” is to access this rule.
This requirement that a hybrid work arrangement be non-tax motivated and “formal” likely is not legally sustainable, but perhaps is being “imposed” to encourage the payroll departments of off-reserve employers to be cautious in accommodating claims by reserve residents that they perform the majority of their duties from home.
Neal Armstrong. Summary of 28 November 2024 External T.I. 2024-1026331E5 F under Indian Act, s. 87.
Symco 2015 – Court of Quebec doubts that a restaurant renovation business was a similar business to a business of manufacturing decorative stone cladding
The taxpayer, which had been engaged in a business of manufacturing decorative stonework claddings, sold essentially all its assets in December 2012 pursuant to a bankruptcy proposal that had been accepted by its creditors, and terminated all its non-shareholder employees. After an acquisition of its control (AoC) in March 2014, it commenced to carry on (from around June 2015) a business of carrying out restaurant renovations, which became profitable. Between the asset sale and the AoC, its activities had been minimal, e.g., two business trips to Haiti, along with a professed desire of one of its shareholders to resume the business. Before confirming ARQ assessments that denied its use of pre-AOC non-capital losses under the Quebec equivalent of s. 111(5)(a)), Boutin JCQ stated:
The economic activity which gave rise to such losses was not the same as the economic activity of [the post-AoC company]. In the opinion of the Court, this is, keeping in mind the words "substantially all” and “similar”, used by the Legislature in [the equivalent of s. 111(5)(a)(ii)(B)], in itself a significant obstacle for the plaintiff. …
[Furthermore] there was a long period of inactivity, the evidence clearly illustrating that the [pre-AoC] company was at a standstill for quite some time.
Neal Armstrong. Summary of Symco 2015 Inc. v. Agence du revenu du Québec, 2024 QCCQ 8022 under s. 111(5)(a)(ii)(B).
Shull – Federal Court finds a breach of procedural fairness by the Tax Court did not require it to allow the taxpayer’s appeal
The taxpayer, who had limited ability to represent himself due to cognitive impairment, was using an agent in his Tax Court hearing until the agent (who had been identified in other proceedings as a vexatious litigant) resigned due to the expressed concerns of the Tax Court regarding such representation. The taxpayer then requested an adjournment to seek advice as to whether he should be represented by counsel, which the Tax Court refused, without giving reasons. The taxpayer was given the choice of discontinuing his appeal - or proceeding with his appeal on his own, which he did.
Monaghan JA found that “the Tax Court breached Mr. Shull’s procedural fairness rights by refusing the adjournment” – but in nonetheless dismissing the taxpayer’s appeal applied the principle (in light of the weakness of the taxpayer’s case) that “where the result is inevitable, a court may exercise its discretion to not grant a remedy for the breach” of procedural fairness.
Neal Armstrong. Summary of Shull v. Canada, 2025 FCA 25 under s. 180(3).
CRA releases the 3 December 2024 CTF Roundtable
CRA has released under the severed letter program the final version of all the questions and answers at the 3 December 2024 CTF Roundtable. For your convenience, the table below sets out the descriptors and links to the summaries, and questions and answers, which we prepared in December.
Income Tax Severed Letters 29 January 2025
This morning's release of 17 severed letters from the Income Tax Rulings Directorate is now available for your viewing.
CRA comments on the timing of disposition on the insolvency of a bitcoin platform operator
CRA applied routine tax concepts to interesting facts.
Following the 2014 insolvency of a Japanese bitcoin platform operator (“Mt. Gox”), which had permanently lost 650,000 bitcoin, the Tokyo court (in 2021) approved a “Rehabilitation Plan” which in general terms gave the former platform users a choice between receiving, on or before October 2025, an “Early Lump-Sum Repayment” (so as to receive payments in cash and Bitcoin Cash totaling approximately 21% of their approved claims) or a “Final Repayment” (entitling them to payments based on the value of the remaining assets of the estate at an undetermined date in the future). The taxpayer elected to receive the Early Lump-Sum Repayment.
CRA found that former users of the Mt. Gox platform did not hold proprietary rights over the bitcoin held through the platform, including those that Mt. Gox had lost, and instead owned contractual claims against Mt. Gox, so that there was no disposition by them when the underlying bitcoin was lost. A disposition of the taxpayer’s claim would instead be considered to have occurred in the year of receipt of the Early Lump-Sum Repayment. Amounts received from the estate in the form of crypto-assets (i.e., the Bitcoin Cash) would be considered to have been “received” by the taxpayer as creditor when the Bitcoin Cash was credited to the taxpayer’s account with a cryptocurrency exchange.
Neal Armstrong Summary of 30 October 2024 Internal T.I. 2023-0996541I7 under s. 248(1) – disposition – (a) and s. 54 – proceeds of disposition.
CRA rules on the application of the half-year rule exception on s. 98(5) wind-ups
2022-0941241R3 concerned the successive wind-ups of two “subsidiary” general partnerships as a result of the parent winding-up under s. 88(1) the two corporate subsidiaries, each of which had been a partner with the parent.
Now, CRA provided a supplementary ruling that, provided that (the 364-day rule in) Reg. 1100(2.2)(f) was satisfied (or as per Reg. 1100(2.2)(g), the Reg. 1100(2.2) exception applied to the transferor partnership), the half-year rule in Reg. 1100(2) did not apply by virtue of Reg. 1100(2.2) to the depreciable property acquired by the parent on the two partnership wind-ups.
Apparently, the point is that the transfer of depreciable property of each subsidiary partnership to the remaining partner (the parent) by operation of law entailed the acquisition of property by the parent from a person with whom the parent was not dealing at arm’s length “at the time the property was acquired,” i.e., the parent is considered, as required by Reg. 1100(2.2)(e), to not be dealing at arm’s length with a person (the partnership, being a person for income-computation purposes) that, as a substantive matter, disappears at the moment in question. (The underlying ruling stated, for instance, that: “For greater certainty, there will not be any time interval between the time of the cessation of Partnership D’s existence and the time that all property of Partnership D is distributed to ParentCo.”)
Neal Armstrong. Summary of 2024 Ruling 2024-1008661R3 under Reg. 1100(2.2)(e).