News of Note

CRA finds NEX is a stock exchange based on Black's Law Dictionary and "commercial point of view"

In finding that NEX of the TSX Venture Exchange is a "stock exchange located in Canada" (and therefore included under paragraph (b) of the definition of "recognized stock exchange" in s. 248(1)), CRA relied on the Black's Law Dictionary definition of "stock exchange" and on the conclusion that the Canadian Securities Administrators would be likely to consider the exchange to be a stock exchange (which would imply that NEX is a stock exchange "from a commercial point of view").

Scott Armstrong.  Summary of 11 September 2012 Memorandum 2012-0454321I7 under s. 248(1) - recognized stock exchange.

Amendment to s. 87(4) does not affect the exemption from s. 116 certificate requirement

IT-474 indicates that there is no requirement to apply for a s. 116 certificate on a statutory amalgamation involving the disposition of shares which are taxable Canadian property.  This policy still applies notwithstanding that, following on the March 2012 Budget, s. 87(4) was amended to provide that, on such an amalgamation, the shares of the amalgamated corporation are deemed to be taxable Canadian property for a period of only five years following the amalgamation.

Neal Armstrong.  Summary of 11 October 2012 T.I. 2011-0429021E5 under s. 116(1).

Income Tax Severed Letters 12 December 2012

This morning's release of nine letters from the Income Tax Rulings Directorate is now available for your viewing.

Service provider is not carrying on business in Canada for GST/HST purposes notwithstanding place where contracts may be made

In determining whether a company is carrying on business in Canada, the place where it concludes contracts for the sale of its products or services likely is not a touchstone if its business is not one of trading property.  CRA appears to agree.  It has indicated that a web based provider of services was not carrying on business in Canada notwithstanding that the place of making of the contracts may have been Canada, it solicited Canadian orders and its employees came to Canada on an irregular basis.

Neal Armstrong.  Summary of 20 August 2012 Interpretation Case No. 140855 under ETA - s. 240(1).

GST/HST Headquarters Letters August 2012

This afternoon's release of 12 GST/HST Headquarters Letters is now available for your viewing.

Michael C. Durst suggests that the OECD draft discussion on transfer pricing for intangibles will combat income shifting through the mere transfer of cash to purchase or develop intangibles

The former director of the IRS's advance pricing agreement program has suggested that the the OECD Discussion Draft on Transfer Pricing for Intangibles combats the fallacy that it complies with the transfer pricing rules for income to be shifted to low tax jurisdictions through "the mere transfer of cash" to the affiliates there, i.e.,  they use cash to purchase intangibles for their fair market value or contract to pay the fair market value of contract services to develop intangibles for their account.

Neal Armstrong.  Summary of Michael C. Durst, "OECD's Fight Against Income Shifting - and for Its Global Role," Tax Notes International, 3 December 2012, p. 933 under Treaties -Art. 9.

Rights offering of the MINT Income Fund is non-taxable

The MINT Income Fund will distribute rights to acquire its units to its unitholders - other than US unitholders, who are ineligible under the 1933 Act to receive certificates for rights, and will instead receive sales proceeds (if any) from the sale of the rights certificates that they would have received if the rights had been registered under that Act.  The rights will be TSX-listed, implying that they are anticipated to have a positive value.

The tax disclosure indicates that the rights issuance "should have no immediate tax consequences for a Unitholder," so that this issuance should not give rise to a taxable benefit under s. 105(1).  This may turn on the proposition that any positive value of the rights received by a unitholder (or the cash proceeds in lieu thereof in the case of a US unitholder) will be offset by dilution in the value of the units held.

Neal Armstrong.  Summary of the MINT Income Fund preliminary short form prospectus under Offerings - Rights Offerings.

GST/HST Headquarters Letters July 2012

GSH/HST Headquarters letters for July 2012 are now available for your viewing.

CRA finds that a s. 84.1 deemed dividend can be an eligible dividend

CRA accepts that a dividend which is deemed by s. 84.1 to be received by an individual from a corporation with which he does not deal at arm's length is an eligible dividend which the deemed payor of the dividend can designate under s. 89(1) as coming out of its GRIP notwithstanding that the individual does not hold any shares of that corporation.

Neal Armstrong.  Summary of 5 October 2012 APFF Roundtable, Q. 11 2012-0454091C6 F under s. 89(14).

CRA finds that grant of power of attorney did not result in an acquisition of control

CRA has stated that the granting of the power of attorney over the shares of a corporation in favour of the shareholder's accountant (an arm's length person), which then took effect on the shareholder's incapacity, did not result in an acquisition of control of the corporation.  Under Duha, such an arrangement, which was external to corporation's corporate constitution, did not affect its control.

Neal Armstrong.  Summary 5 October 2012 APFF Roundtable, Q 17 2012-0454111C6 F of under s. 249(4).