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: Are racehorse track operators required to withhold purse winnings paid to nonresident horse owners when the owners' horse places in a winning position?
Position: No.
Reasons: Ownership interest in a horse which wins a race is not a service provided to the track operator by a horse owner.
XXXXXXXXXX 2011-042504
XXXXXXXXXX , 2011
Dear XXXXXXXXXX ,
Re: Advance Income Tax Ruling - XXXXXXXXXX (the "Company")
This is in response to your XXXXXXXXXX , request for an advance income tax ruling on behalf of the above-referenced entity.
We understand that, to the best of your knowledge and that of the taxpayers involved, none of the issues involved in this advance income tax ruling:
(i) are in an earlier return of the Company or a related person;
(ii) are being considered by a Tax Services Office or Taxation Centre in connection with a previously filed tax return of the Company or a related person;
(iii) are under objection by the Company or a related person;
(iv) are before the courts or; or
(v) are the subject of a ruling previously issued by the Income Tax Ruling Directorate.
Definitions:
"Act" means the Income Tax Act, RSC 1985 (5th Supp) c 1, as amended to the date of this advance income tax ruling;
"Regulations" means the Income Tax Regulations, CRC, c 945, as amended to the date of this advance income tax ruling;
"Owner" means the owner of XXXXXXXXXX ;
"Trainer" means a horse trainer;
"Driver" means a horse jockey or driver;
"Purse" means money the Company pays to Owners for their horse finishing in a top position in a race organized by the Company;
"Commission" means the XXXXXXXXXX Racing Commission; and
"Non-resident Owner" means an Owner who is not resident in Canada for the purposes of the Act.
Facts:
1. The Company was originally incorporated under the name XXXXXXXXXX , under the XXXXXXXXXX Corporations Act.
2. The Company's head office is at XXXXXXXXXX .
3. The Company's business number for remittance of withholding taxes is XXXXXXXXXX .
4. The Company organizes XXXXXXXXXX horse races with various, pre-determined Purses.
5. The Company is licensed by the Commission.
6. Typically, the Company deals with an Owner through a Trainer, who in turn deals with a Driver. Usually, the roles of Owner, Trainer, and Driver in respect of a single horse are filled by three different persons but it is not uncommon for an Owner to also provide the other roles.
7. The Company does not own, train or race XXXXXXXXXX . The Company does provide horse and race facilities (XXXXXXXXXX ) for the benefit of the Owners, Trainers and Drivers.
8. The Owner of an interest in a horse could be an incorporated stable, a partnership or an individual.
9. Owners, Trainers and Drivers must be licensed by the Commission.
10. A Trainer may choose to enter a horse in a race organized by the Company. If so, the Trainer retains services of a Driver to ride the horse during the race.
11. If a race offered by the Company has a sufficient number of entrants, the Company schedules the race for a particular day.
12. Some races require entrants to pay an entry fee to participate, but there are no entry fees for the majority of races organized by the Company.
13. The Owners of the horses that finish in the top positions (XXXXXXXXXX ) receive defined percentages of the Purse. The Commission may also approve other payments of Purse money to Owners of other competing horses that do not finish in the top positions.
14. The Company then distributes the Purse, or parts thereof, to the Owners in accordance with the Commission's regulatory rules. If applicable, the Company then also arranges payment on behalf of the Owner to the Trainer or Driver, which may be a flat fee or a percentage of the Purse won by the Owner, and these payments are subject to HST and/or non-resident withholding tax where applicable.
15. A Purse is paid to a winning Owner in return for their horse's successful completion of the race competition put on by the Company. An Owner whose horse does not place in the top positions in a race may receive nothing from the Company in return for entering the race.
Proposed transactions:
The Company will offer races in the future with higher Purses to be paid to Owners for their horses winning a race.
Purpose of the proposed transactions:
The purpose of the proposed transactions is to attract Owners, including Non-resident Owners, to bring their horses to the Company's race track.
Ruling given:
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our Ruling is as follows:
Paragraph 153(1)(g) of the Act and subsection 105(1) of the Regulations will not require the Company to withhold any amount from a Purse paid to a Non-resident Owner.
This ruling is based solely on the facts and proposed transactions described above and is subject to the limitations and qualifications set forth in Information Circular 70-6R5 issued on May 17, 2002. This ruling is binding on the Canada Revenue Agency provided that the proposed transactions are completed on or before XXXXXXXXXX .
Nothing in this letter should be construed as implying that the Canada Revenue Agency has reviewed, accepted or otherwise agreed to any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the ruling given above. In particular, nothing in this ruling should be construed as implying that the Canada Revenue Agency has agreed to or reviewed whether or not withholding is required for other payments made by the Company to Non-resident Owners, such as, but not limited to, appearance fees and endorsements.
The above noted ruling is based on the Act and the Regulations in their present form and does not take into account any proposed amendments to the Act or the Regulations which, if enacted, could have an effect on the ruling provided herein.
Yours truly,
XXXXXXXXXX
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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