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: Whether a pre-owned piece of equipment substantially refurbished and sold again by the manufacturer with a similar warranty to that offered on the purchase of new equipment is considered to be new for ITC purposes.
Position: Yes.
Reasons: Paragraph 24 of IT-331R.
XXXXXXXXXX 2011-041582
Charles Rafuse
613-247-9237
August 22, 2011
Dear XXXXXXXXXX :
Re: Whether Equipment is "used"
This is in response to your email of July 19, 2011, wherein you requested our opinion on whether equipment is considered to be "new" for investment tax credit ("ITC") purposes.
It would appear that your concern is with respect to the condition in the definition of "qualified property" in subsection 127(9) that prescribed machinery and equipment "has not been used, or acquired for use or lease, for any purposes whatever, before it was acquired by a taxpayer". You have indicated that a pre-owned piece of equipment is substantially refurbished and sold again by the manufacturer with a similar warranty to that offered on the purchase of new equipment. You have asked whether the refurbished equipment is eligible for an ITC or whether the fact that it was pre-owned makes it ineligible even though it was substantially refurbished to a new condition as described above
Our Comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office (the "TSO"). We are, however, prepared to make the general comments set out below, which may be of assistance.
Former Interpretation Bulletin IT-331R, Investment Tax Credit, provided comments on ITC. The Bulletin was cancelled in 1994. The Canada Revenue Agency's ("CRA") administrative practice regarding major renovations was stated in paragraph 24 of this Bulletin which read as follows:
"Major renovations to a taxpayer's qualified machinery or equipment, qualified transportation equipment or qualified construction equipment ("the equipment") that are capital in nature will normally be creditable investments providing the renovated equipment continues to satisfy the other eligibility conditions. Where used equipment is renovated by a vendor and those renovations are so significant that the equipment, when acquired by a taxpayer can be said to be new, it will also constitute a creditable investment if the other eligibility conditions are met. However, where, subsequent to the acquisition of used equipment, a taxpayer carries out major renovations only the costs of the renovations may qualify."
Although the Bulletin was cancelled, this position still represents the CRA's administrative practice.
We trust that these comments will be of assistance.
Yours truly
S. Parnanzone
Manager
For Director
Business and Partnership Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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