2009 Ruling 2009-0343641R3 - Dividend Paid by ULC to Dutch Resident

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) Whether gains from disposition of taxable Canadian property realized by United States resident eligible for treaty protection under Article XIII of the Canada-United States Tax Convention (1980) by virtue of Article XXIX-A(3)? 2) Does dividend withholding rate under Article 10(2) of Canada-Netherlands Tax Convention (1986) apply to dividends paid to a Netherlands-resident subsidiary of a United States-resident corporation in XXXXXXXXXX by Canadian-resident unlimited liability company that is fiscally transparent for United States federal income tax purposes?

Position: 1) Article XIII applies by virtue of Article XXIX-A(3). 2) Provided Netherlands-resident corporation is beneficial owner of dividends, Article 10(2)(a) will apply in the circumstances.

Reasons: 1) Gain will be derived in connection with a qualified United States trade or business that is substantial in relation to the activity giving rise to the gain. 2) Meets the requirements of Article 10(2)(a) of that income tax convention. GAAR not applicable in the circumstances.

XXXXXXXXXX 									2009-034364

XXXXXXXXXX , 2009

Dear Sir:

Re: XXXXXXXXXX
Advance Income Tax Ruling Request

We are writing in response to your letter of XXXXXXXXXX , in which you requested an advance income tax ruling on behalf of the above-noted taxpayer. We also acknowledge the information provided in subsequent correspondence dated XXXXXXXXXX , and in the course of various telephone conversations and e-mail correspondence. You have advised us that, to the best of your knowledge and that of the taxpayers involved, none of the issues involved in this ruling request are:

(i) in an earlier return of the taxpayer or persons related to the taxpayer;
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or persons related to the taxpayer;
(iii) under objection by the taxpayer or persons related to the taxpayer;
(iv) before the courts; or
(v) the subject of a ruling previously issued by the Income Tax Rulings Directorate.

Unless otherwise noted, all statutory references herein are to the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended (hereinafter referred to as the "Act"). Unless otherwise noted, all references to currency are to Canadian dollars.

DEFINITIONS

(a) "adjusted cost base" has the meaning assigned by section 54;

(b) "BCA" means the XXXXXXXXXX , and the regulations thereto;

(c) "Canco A" means XXXXXXXXXX ., a corporation formed under the laws of Canada;

(d) "Canco B" means XXXXXXXXXX ., a corporation incorporated under the laws of Canada;

(e) "capital property" has the meaning assigned by section 54;

(f) "Code" means the Internal Revenue Code of 1986, 26 U.S.C, as amended;

(g) "CRA" means the Canada Revenue Agency;

(h) "Dutch BV" means a private limited liability company formed under the laws of the Netherlands, as described in Paragraphs 37, 38 and 39;

(i) "Dutch Tax Treaty" means the Canada-Netherlands Income Tax Convention (1986), as amended;

(j) "Existing ULC Common Shares" means the issued and outstanding XXXXXXXXXX shares in the capital stock of ULC described in Paragraph 9;

(k) "fair market value" means the amount, expressed in money terms, that is the highest price available in an open and unrestricted market between informed and prudent parties dealing at arm's length;

(l) "Issue Price" means the price for which a LLC Special Share is issued, as described in Paragraph 19(c)(iv);

(m) "LLC" means XXXXXXXXXX , a limited liability company formed under the laws of the state of XXXXXXXXXX ;

(n) "LLC Common Shares" means the XXXXXXXXXX shares of LLC as described in Paragraph 19(a);

(o) "LLC Special Shares" means the XXXXXXXXXX shares of LLC as described in Paragraph 19(c);

(p) "New ULC" means an unlimited liability company formed under the laws of XXXXXXXXXX , as described in Paragraphs 27 and 28;

(q) "New ULC Common Shares" means XXXXXXXXXX shares in the capital stock of New ULC as described in Paragraph 28(a);

(r) "New ULC Note" means a demand, non-interest bearing promissory note to be issued by New ULC to ULC on the redemption of the New ULC Preferred Shares as described in Paragraph 34;

(s) "New ULC Preferred Shares" means XXXXXXXXXX shares in the capital stock of New ULC as described in Paragraph 28(b);

(t) "New ULC Redemption Amount" means the aggregate amount for which the New ULC Preferred Shares may be redeemed, at the option of New ULC, or retracted, at the option of the holder, as described in Paragraph 28(b);

(u) "paid-up capital" or "PUC" has the meaning assigned by subsection 89(1);

(v) "Paragraph" means a numbered paragraph in this letter;

(w) "Parentco" means XXXXXXXXXX

(x) "person" has the meaning assigned by subsection 248(1);

(y) "Preliminary Transactions" means the transactions which are described in Paragraphs 25 to 36 to be implemented prior to the Proposed Transactions;

(z) "principal amount" has the meaning assigned by subsection 248(1);

(aa) "Proposed Transactions" means the transactions described in Paragraphs 37 to 41;

(bb) "related person" means, in relation to a particular person, another person who is related to the particular person by virtue of subsection 251(2), as modified for the purposes of section 55 by paragraph 55(5)(e);

(cc) "series of transactions or events" has the meaning assigned by subsection 248(10);

(dd) "Special Share Participating Percentage" has the meaning assigned by Paragraph 19(c)(iii);

(ee) "stated capital" has, in relation to a corporation that exists under the BCA, the meaning assigned by section XXXXXXXXXX of the BCA;

(ff) "taxable Canadian corporation" has the meaning assigned by subsection 89(1);

(gg) "U.S. Tax Treaty" means the Canada-United States Tax Convention (1980), as amended;

(hh) "ULC" means XXXXXXXXXX , an unlimited liability company formed under the laws of XXXXXXXXXX ;

(ii) "ULC Common Shares" means the common shares in the capital stock of the ULC as described in Paragraph 25(a);

(jj) "ULC Note" means a demand non-interest bearing promissory note to be issued by ULC to New ULC on the redemption of the ULC Preferred Shares as described in Paragraph 35;

(kk) "ULC Preferred Shares" means the XXXXXXXXXX shares in the capital stock of ULC as described in Paragraph 25(b);

(ll) "ULC Redemption Amount" means the aggregate amount for which the ULC Preferred Shares may be redeemed, at the option of ULC, or retracted, at the option of the holder, as described in Paragraph 25(b);

(mm) "United States" means the United States of America;

(nn) "US Holdco" means XXXXXXXXXX ., a corporation formed under the laws of the state of XXXXXXXXXX ;

(oo) "US Opco Common Shares" means the XXXXXXXXXX shares of US Opco as described in Paragraph 24;

(pp) "US Opco" means XXXXXXXXXX ., a corporation formed under the laws of the state of XXXXXXXXXX ; and

(qq) "US Subco" means XXXXXXXXXX ., a corporation formed under the laws of the state of XXXXXXXXXX .

FACTS

1. Parentco is headquartered in XXXXXXXXXX and is the parent company of the "XXXXXXXXXX " group of companies, XXXXXXXXXX . Its shares trade on the XXXXXXXXXX .

2. US Holdco is not resident in Canada for the purposes of the Act and is a resident of the United States under the U.S. Tax Treaty.

3. Since XXXXXXXXXX , all of the issued and outstanding shares of US Holdco have been owned, directly or indirectly, by Parentco. Prior to that date, the XXXXXXXXXX shares of US Holdco were listed for trading on the XXXXXXXXXX , although the majority of such shares were held, directly or indirectly, by Parentco.

4. US Subco was incorporated under the laws of the state of XXXXXXXXXX in XXXXXXXXXX . The issued and outstanding share capital of US Subco consists of XXXXXXXXXX shares and XXXXXXXXXX shares. The XXXXXXXXXX shares of US Subco are held by US Holdco; its XXXXXXXXXX shares are held by a direct wholly-owned subsidiary of Parentco incorporated under the laws of XXXXXXXXXX .

5. Among other things, US Holdco is, directly and through subsidiaries in the United States and Canada, a XXXXXXXXXX .

6. ULC is a taxable Canadian corporation, formed under the BCA on XXXXXXXXXX . Its taxation years end on XXXXXXXXXX . The mailing address of the ULC is XXXXXXXXXX and its registered office is located at XXXXXXXXXX . ULC files its Canadian federal income tax returns at the XXXXXXXXXX Taxation Centre and it Canadian federal income tax affairs are administered by the XXXXXXXXXX Tax Services Office.

7. ULC functions as a holding company for a number of operating subsidiaries in Canada and the United States. The subsidiaries of ULC directly or indirectly carry on the following businesses: XXXXXXXXXX .

8. ULC is capitalized exclusively with share capital and, other than miscellaneous trade payables, it has no outstanding debt, nor has it had any such debt.

9. The issued and outstanding share capital of ULC consists of XXXXXXXXXX shares (the "Existing ULC Common Shares"), all of which are held by US Holdco as capital property for the purposes of the Act. Since incorporation, all of the shares of ULC have been held by US Holdco. Currently, the FMV of the Existing ULC Common Shares exceeds US Holdco's ACB of such shares. The PUC of the Existing ULC Common Shares is less than US Holdco's ACB of such shares.

10. For United States federal income tax purposes, ULC is disregarded as an entity separate from its shareholder US Holdco.

11. Canco A is a taxable Canadian corporation. Canco A, directly and through its subsidiaries, carries on, in Canada, the businesses described in Paragraph 7.

12. On XXXXXXXXXX , US Holdco transferred all of the XXXXXXXXXX shares of Canco A held by it to ULC.

13. Prior to XXXXXXXXXX , the issued and outstanding shares of Canco A consisted of XXXXXXXXXX shares, all of which were held by ULC, and XXXXXXXXXX shares. The XXXXXXXXXX shares were listed for trading on the XXXXXXXXXX . Holders of XXXXXXXXXX shares were entitled to exchange such shares for shares of US Holdco. XXXXXXXXXX shares were issued as part of a transaction that occurred in XXXXXXXXXX in which US Holdco acquired all of the XXXXXXXXXX shares of Canco A, which was then known as XXXXXXXXXX . In XXXXXXXXXX , XXXXXXXXXX shares were issued upon conversion of XXXXXXXXXX Shares of Canco A. Additional XXXXXXXXXX shares were issued annually until XXXXXXXXXX under a dividend reinvestment plan, an employee stock purchase plan and an employee stock option plan.

14. Over time, US Holdco directly and indirectly acquired XXXXXXXXXX shares from holders that exercised the rights of exchange to receive shares of US Holdco. The remaining outstanding XXXXXXXXXX shares not acquired by US Holdco were widely-held as of XXXXXXXXXX .

15. On XXXXXXXXXX , certain "going-private" transactions occurred that resulted in the elimination of all minority holdings in Canco A. US Holdco first transferred all of its XXXXXXXXXX shares of Canco A to ULC for additional XXXXXXXXXX shares of ULC; ULC then transferred these XXXXXXXXXX shares to a related corporation. Canco A and the related corporation amalgamated on XXXXXXXXXX , for the purpose of eliminating all minority interests in Canco A. The XXXXXXXXXX shares of Canco A, other than the XXXXXXXXXX shares held by the related company, were exchanged for XXXXXXXXXX shares of the amalgamated corporation, which were immediately redeemed for cash. As a result of this going-private transaction, the post-amalgamated Canco A became a direct, wholly-owned subsidiary of ULC.

16. During the period between XXXXXXXXXX , Canco A was a direct wholly-owned subsidiary of ULC. Since XXXXXXXXXX , ULC has indirectly held all of the issued and outstanding shares of Canco A through its wholly-owned subsidiary Canco B.

17. Canco B is a taxable Canadian corporation formed on XXXXXXXXXX . Canco B functions as a holding company for subsidiaries.

18. LLC is a limited liability company that was formed under the laws of the state of XXXXXXXXXX on XXXXXXXXXX . LLC is treated as a partnership between US Holdco and US Subco for United States federal income tax purposes.

19. The authorized share capital of LLC consists of:

(a) XXXXXXXXXX (the "LLC Common Shares");

(b) XXXXXXXXXX ; and

(c) Special shares (the "LLC Special Shares"), the rights, privileges, conditions and restrictions attached to which include the following:

(i) the holders of the LLC Special Shares are entitled to one vote per share, subject to a minimum number of votes equal to XXXXXXXXXX % of the votes attached to all shares of LLC, and a maximum number of votes equal to XXXXXXXXXX % of the total voting rights;

(ii) the holders are entitled to a minimum fixed cumulative preferential dividend in the amount of US$XXXXXXXXXX per share per annum (which represents a XXXXXXXXXX % rate per annum based on the amount for which each share was issued), payable when and as declared by the board of managers of LLC;

(iii) in addition to the minimum fixed cumulative dividend entitlement, the holders are entitled to participate in any dividends paid on the LLC Common Shares; the participating dividend is (in the aggregate) equal to a percentage (the "Special Share Participating Percentage") of dividends paid to holders of the LLC Common Shares based on the proportion of the total capital of LLC contributed in respect of the Special Shares relative to the total capital contributed in respect of all shares of LLC, to a maximum of $XXXXXXXXXX in aggregate in any year;

(iv) the holders of the LLC Special Shares are entitled, from and after the XXXXXXXXXX anniversary of the date of issuance of the shares, to convert such shares into that number of XXXXXXXXXX of the LLC determined by dividing the Issue Price of the Special Share by an amount equal to XXXXXXXXXX % of the fair market value of an LLC Common Share (for this purpose, "Issue Price" of an LLC Special Share is defined as the Canadian dollar equivalent of US$XXXXXXXXXX at the date of its issue);

(v) LLC is entitled, from and after the XXXXXXXXXX anniversary of the date of issuance of the Special Shares, to convert all of the Special Shares held by a holder into XXXXXXXXXX on the same basis as is described in (iv) above; and

(vi) upon liquidation, the LLC Special Shares are entitled to receive a preferential distribution in priority to the LLC Common Shares equal to the aggregate of (a) the Issue Price of such shares; (b) all accrued and unpaid cumulative dividends on such shares; and (c) the Special Share Participating Percentage of the amount that would, but for such participating rights of the LLC Special Shares, be distributed to the holders of the LLC Common Shares, to a maximum of approximately $XXXXXXXXXX .

20. ULC holds all of the issued and outstanding LLC Special Shares as capital property for the purposes of the Act. US Subco holds all of the issued and outstanding LLC Common Shares. No XXXXXXXXXX of LLC have been issued.

21. ULC acquired the LLC Special Shares from US Holdco on XXXXXXXXXX for cash consideration equal to the Canadian dollar equivalent of approximately US$XXXXXXXXXX , being the aggregate Issue Price of the LLC Special Shares. At the present time management believes that the FMV of the LLC Special Shares exceeds ULC's ACB of such shares.

22. From XXXXXXXXXX , US Holdco, and subsequently US Subco, have continuously owned all of the LLC Common Shares and ULC has continuously owned all of the LLC Special Shares.

23. US Opco is not resident in Canada for the purposes of the Act and is a resident of the United States under the U.S. Tax Treaty. US Opco carries on the business of XXXXXXXXXX in the United States. All or substantially all of the assets and revenue of US Opco are directly related to this business or the business of a related operating company in the United States. The assets of US Opco include a substantial receivable from US Holdco that arises primarily from a cash sweep arrangement under which cash of various operating entities in the related United States group is concentrated in US Holdco and redeployed amongst the members of the United States related group for use in their businesses.

24. The issued and outstanding share capital of US Opco consists of XXXXXXXXXX shares (the "US Opco Common Shares"), all which have been continuously owned by LLC since XXXXXXXXXX . Prior to XXXXXXXXXX , US Opco was a wholly-owned subsidiary of US Holdco. On XXXXXXXXXX , LLC acquired the US Opco Common Shares from US Holdco in exchange for the issuance to US Holdco of the LLC Special Shares and the LLC Common Shares.

PRELIMINARY TRANSACTIONS

25. US Holdco, as the sole shareholder of ULC, will pass a special resolution to amend the Articles of Incorporation of ULC pursuant to the provisions of the BCA, to increase the voting rights of the Existing ULC Common Shares to XXXXXXXXXX votes per share and to create:

(a) an additional class of XXXXXXXXXX shares (the "ULC Common Shares"), having the same rights, conditions and privileges as the Existing ULC Common Shares except that the voting rights applicable to ULC Common Shares will be one vote per share; and

(b) a class of XXXXXXXXXX authorized XXXXXXXXXX shares (the "ULC Preferred Shares"), which will not entitle the holder(s) thereof to any voting rights or to dividends; such shares will be retractable and redeemable for an aggregate redemption amount (the "ULC Redemption Amount") fixed at the first issuance of such shares equal to the FMV of the LLC Special Shares held by the ULC, subject to an appropriate price adjustment mechanism.

26. US Holdco will exchange all of the Existing ULC Common Shares for (i) all of the authorized ULC Preferred Shares; and (ii) XXXXXXXXXX ULC Common Shares. The Existing ULC Common Shares will be cancelled. The balance of the stated capital account maintained in respect of the Existing ULC Common Shares will be deducted and such amount will be added, in accordance with the provisions of the BCA, to the stated capital account maintained in respect the ULC Preferred Shares and the ULC Common Shares based on the proportion thereof that the FMV of each of such two classes of shares immediately after the share exchange is of the FMV of the Existing ULC Common Shares immediately before the share exchange. For greater certainty, the PUC of the ULC Preferred Shares and the ULC Common Shares, in aggregate, will not exceed the PUC of the Existing ULC Common Shares.

27. US Holdco will form New ULC as an unlimited liability company under the BCA. New ULC will be a taxable Canadian corporation. No shares of New ULC will be issued on incorporation.

28. The authorized share capital of New ULC will consist of:

(a) a class of XXXXXXXXXX shares ("New ULC Common Shares") which will be voting, entitle their holder(s) to dividends as the directors may declare from time to time, and, subject to any priority attached to any class of shares ranking ahead of such New ULC Common Shares, entitle their holder(s) to receive all of the net assets of the New ULC in the event of a liquidation of the New ULC; and

(b) a class of XXXXXXXXXX shares ("New ULC Preferred Shares"), which will be non-voting and will not carry any dividend rights; each New ULC Preferred Share will be retractable and redeemable for an amount (the "New ULC Redemption Amount") fixed at the first issuance of such shares equal to the FMV of the consideration received by New ULC for which the New ULC Preferred Share was issued. A holder of a New ULC Preferred Share will be entitled, upon the liquidation, dissolution or winding-up of the New ULC, to a payment in priority to all other classes of shares of New ULC of an amount equal to the New ULC Redemption Amount.

29. US Holdco will transfer the ULC Preferred Shares to the New ULC in exchange for New ULC Common Shares.

30. Immediately after the share transfer described in Paragraph 29, ULC will transfer the LLC Special Shares to New ULC in exchange for New ULC Preferred Shares having an aggregate New ULC Redemption Amount equal to the aggregate FMV of the LLC Special Shares transferred to it by ULC.

31. In respect of each of the transfers described in Paragraphs 29 and 30, the transferor and transferee will file a joint election in the prescribed form, and within the time limits referred to in subsection 85(6), to have the provisions of subsection 85(1) apply in respect of the share transfer. The agreed amount in each joint election will be equal to the ACB of the transferred shares.

32. For the purposes of the BCA, on the issuance of the New ULC Common Shares to US Holdco in exchange for the ULC Preferred Shares, New ULC will add to the stated capital account maintained in respect of the New ULC Common Shares an amount equal to the PUC of the ULC Preferred Shares.

33. For the purposes of the BCA, New ULC will add to the stated capital account maintained in respect of the New ULC Preferred Shares an amount equal to the aggregate cost amount of the LLC Special Shares acquired from ULC, determined pursuant to subsection 85(1). For greater certainty, the increase to the PUC of the New ULC Preferred Shares issued by New ULC will not exceed the aggregate ACB to ULC of the LLC Special Shares immediately before the transfer.

34. After the transfers described in Paragraphs 29 and 30, New ULC will redeem the New ULC Preferred Shares for an amount equal to their aggregate New ULC Redemption Amount. As payment of the New ULC Redemption Amount, New ULC will issue the New ULC Note which will have a principal amount equal to the New ULC Redemption Amount. ULC will accept the New ULC Note as full payment for the Redemption Amount of the New ULC Preferred Shares.

35. Contemporaneously, ULC will redeem the ULC Preferred Shares owned by the New ULC for an amount equal to the ULC Redemption Amount. As payment of the ULC Redemption Amount, ULC will issue the ULC Note which will have a principal amount equal to the ULC Redemption Amount. For greater certainty, the principal amount of the ULC Note will be equal to the principal amount of the New ULC Note. New ULC will accept the ULC Note as full payment for the ULC Redemption Amount of the ULC Preferred Shares.

36. Pursuant to an agreement that will be entered into between New ULC and ULC, the principal amount owing by New ULC to ULC under the New ULC Note and the principal amount owing by ULC to New ULC under the ULC Note will be set-off in full against each other and each such note will be marked paid in full and cancelled.

PROPOSED TRANSACTIONS

37. US Holdco will incorporate the Dutch BV. Dutch BV will not be resident in Canada for the purposes of the Act and will be a resident of the Netherlands under the Dutch Tax Treaty.

38. The articles of association of the Dutch BV will provide that its undertaking will be the holding of investments and such other activities that are necessary or ancillary to such undertaking. The authorized share capital of the Dutch BV will consist of an unlimited number of XXXXXXXXXX shares. US Holdco will subscribe for 1 XXXXXXXXXX share of the Dutch BV on incorporation for nominal cash consideration of $XXXXXXXXXX .

39. The articles of association of Dutch BV will provide that:

(a) the registered office of Dutch BV will be located in the Netherlands;

(b) the majority of the board of managing directors of Dutch BV will be individuals resident in the Netherlands;

(c) meetings of the board of managing directors will take place in the Netherlands; and

(d) the payment of ordinary dividends, after adoption of the annual accounts, is determined at the general meeting of shareholders, but the shareholders may only approve a payment of ordinary dividends if recommended by the board of managing directors.

40. US Holdco will transfer all of the New ULC Common Shares to Dutch BV in exchange for XXXXXXXXXX shares of the capital stock of Dutch BV having an aggregate FMV equal to the aggregate FMV of the New ULC Common Shares at the time of the transfer.

41. In XXXXXXXXXX , New ULC will pay dividends to Dutch BV on the New ULC Common Shares.

ADDITIONAL INFORMATION

42. The Preliminary Transactions and Proposed Transactions will occur in the order presented unless otherwise indicated, with the exception of the filing of any applicable election forms in respect of the Preliminary Transactions described in Paragraphs 29 and 30, which will be filed on or before the applicable due date.

43. Other than as described herein, no transactions have been completed prior to the date of this letter nor are there any other transactions currently being contemplated that would form part of the series of transactions or events that includes the Preliminary Transactions or the Proposed Transactions.

44. Dutch BV will carry out all of its activities and undertakings in accordance with Dutch corporate law and in accordance with its articles of association. There will be no shareholder agreement or other arrangement that will require Dutch BV to declare or pay dividends, and the board of managing directors of Dutch BV will not enter into any such agreement or arrangement.

45. US Holdco will file a "check-the-box" election under the Code so that Dutch BV will be disregarded as an entity separate from its shareholder US Holdco for United States federal income tax purposes.

46. At the time of the transfer of the New ULC Common Shares described in Paragraph 40, the LLC Special Shares will represent substantially all of the FMV of New ULC's property, substantially all of the FMV of the LLC Special Shares will be attributable to the US Opco Common Shares, US Opco's business activities and its assets and revenues will be as described in Paragraph 23, and US Opco and US Holdco will be related persons.

PURPOSES OF THE PROPOSED TRANSACTIONS

47. After XXXXXXXXXX , Article IV(7)(b) will apply to dividends paid by ULC to US Holdco. As a result of the application of Article IV(7)(b), US Holdco will generally no longer be entitled treaty benefits under the U.S. Tax Treaty in respect of dividends US Holdco receives on shares of the ULC.

48. The purpose of the Preliminary Transactions and the Proposed Transactions described herein is to allow dividends to be paid out of the proceeds of dividends received on the LLC Special Shares, that will be subject to Part XIII dividend withholding tax at the rate described in Article 10(2)(a) of the Dutch Treaty, which is equal to the rate of Part XIII withholding tax which would have applied to dividends paid or credited by ULC to US Holdco after XXXXXXXXXX but for Article IV(7)(b).

49. The purpose of the Proposed Transactions is to transfer beneficial ownership of all of the New ULC Common Shares to Dutch BV such that income, profits or gains derived by Dutch BV from such shares will qualify for treaty benefits under the Dutch Tax Treaty.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, the preliminary transactions, the proposed transactions and the purposes of the proposed transactions, and provided further that the Proposed Transactions are completed in the manner described above, we rule as follows:

A. Pursuant to Article XXIX-A(3) of the U.S. Tax Treaty, the benefits of Article XIII of the U.S. Tax Treaty will apply to US Holdco with respect to the amount of any taxable capital gain realized by US Holdco on the disposition of the New ULC Common Shares to Dutch BV described in Paragraph 40.

B. Provided that Dutch BV is the beneficial owner, for the purposes of the Dutch Tax Treaty, of the New ULC Common Shares and of any dividends and distributions thereon, Article 10(2) of the Dutch Tax Treaty will apply to dividends paid or credited by New ULC to Dutch BV on the New ULC Common Shares.

C. Subsection 245(2) will not apply to the Proposed Transactions, in and by themselves, to re-determine the tax consequences confirmed in the rulings given.

CAVEAT

Nothing in this letter should be construed as implying that the CRA has agreed to or reviewed:

(a) the determination of the ACB, PUC or FMV of any shares or other property referred to herein;

(b) any tax consequences relating to the Preliminary Transactions, and, in particular, the application of subsection 55(2) and paragraph 55(3)(a) in respect of the transactions described in Paragraphs 34 and 35; and

(c) any tax consequences relating to the facts and Proposed Transactions described herein other than those described in the rulings given above.

This ruling is based solely on the facts, Preliminary Transactions, Proposed Transactions and additional information 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 CRA provided that the Proposed Transactions are completed on or before XXXXXXXXXX .

Yours truly,

for Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch