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.
Principal Issues: 1. Would an amount included in income pursuant to subsection 94.1(1) of the Act be considered "aggregate investment income" as defined in subsection 129(4) of the Act?
2. Would an amount included in income pursuant to subsection 17(1) of the Act be considered "aggregate investment income" as defined in subsection 129(4) of the Act?
Position: 1. Maybe
2. Yes
Reasons: 1. An amount included in income pursuant to subsection 94.1(1) would be considered to be from a source that is a property. Where the taxpayer is a corporation, the amount would be included in the definition of "aggregate investment income" in subsection 129(4).
2. An amount included in income pursuant to subsection 17(1) would be considered to be from a source that is a property. Where the taxpayer is a corporation, the amount would be included in the definition of "aggregate investment income" in subsection 129(4).
July 20, 2011
XXXXXXXXXX HEADQUARTERS
Income Tax Rulings
Directorate
M. Gauthier
(613) 948-1143
Attention: XXXXXXXXXX 2011-039796
Aggregate Investment Income
We are writing to you in reply to your email dated January 20, 2011 in which you request our opinion as to whether certain amounts that are deemed to be included in income would be considered income from a source that is property and included in the definition of aggregate investment income in subsection 129(4) of the Income Tax Act (the "Act"). As per our telephone conversation on July 18, 2011, the response is being sent in English.
The definition of aggregate investment income could impact the general rate reduction available in subsection 123.4(2) as well as the additional refundable tax on investment income of a CCPC in section 123.3 and the dividend refund of that tax in subsection 129(1) through the definition of "refundable dividend tax on hand" (RDTOH) in subsection 129(3).
The reason for the request was to obtain our position in response to commentary found in a footnote in CCH Tax Topics Number 1987 dated April 8, 2010. The footnote stated:
"As a side note, it is interesting to consider whether section 94.1 income constitutes "aggregate investment income" under subsection 129(4), which would be, in the case of a taxpayer that is a Canadian-controlled private corporation, ineligible for the general rate reduction under subsection 123.4(2) and subject to additional refundable tax (6"2/3"%) under section 123.3. While, in the context of the FAPI regime, subsection 91(1) expressly provides that the income is to be included "as income from the share" of the capital stock of the CFA, there is no like language employed in section 94.1. Further, while paragraph 12(1)(k) expressly provides that there shall be included in computing the income of a taxpayer as income from a business or property "any amount required by subdivision i to be included in computing the taxpayer's income for the year - in respect of a share owned by the taxpayer of the capital stock of a foreign affiliate of the taxpayer", there is no like language in respect of section 94.1. While the operation of section 94.1 requires the holding of an interest in a non-resident entity as a sine qua non to its application, nothing in that provision or elsewhere in the ITA deems the income to which it gives rise as income from that interest."
Questions:
1. Would an amount included in income pursuant to subsection 94.1(1) of the Act be considered "aggregate investment income" as defined in subsection 129(4) of the Act?
2. Would an amount included in income pursuant to subsection 17(1) of the Act be considered "aggregate investment income" as defined in subsection 129(4) of the Act?
Analysis:
1. Would an amount included in income pursuant to subsection 94.1(1) of the Act be considered "aggregate investment income" as defined in subsection 129(4) of the Act?
Subsection 94.1(1) of the Act includes an amount in the income of a taxpayer where the taxpayer holds or has an interest in certain property referred to as offshore investment fund properties. An amount included by virtue of subsection 94.1(1) would be included in income pursuant to paragraph 12(1)(k) and the amount would be considered income from a source that is property. The definition of "aggregate investment income" in subsection 129(4) applies to corporations only. Therefore, only where the taxpayer is a corporation will the amount included in income pursuant to subsection 94.1(1) be considered "aggregate investment income".
2. Would an amount included in income pursuant to subsection 17(1) of the Act be considered "aggregate investment income" as defined in subsection 129(4) of the Act?
Subsection 17(1) of the Act includes an amount in the income of a corporation resident in Canada where a non-resident person owes an amount to that corporation and the amount remains outstanding for more than a year without interest or at a favourable rate of interest. Due to the fact that the income relates to a debt that is a property, it is our opinion that the amount being included in income pursuant to subsection 17(1) would be considered income from a source that is a property. As such, the income would be included in "aggregate investment income" as defined in subsection 129(4).
XXXXXXXXXX
We hope this information is of assistance to you.
Yours truly,
Alain Godin
Section Manager for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency
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