24 February 2017 External T.I. 2017-0685601E5 - Taxation of earnings by Canadian 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: How would earnings from proposed business be taxed?

Position: General comments provided.

Reasons: Multiple general scenarios presented.

2017-068560

From: Belova, Julia
Sent: February-24-17 04:17 PM
To: XXXXXXXXXX
Subject: Your letter of October 26, 2016

Dear XXXXXXXXXX,

We have received your letter of October 26, 2016, which was forwarded to us by the office of Honourable Diane Lebouthillier, Minister of National Revenue. Thank you for your inquiry.

We are happy to discuss it with you further over the phone so that we can understand better the various options you are considering for establishing a XXXXXXXXXX business in XXXXXXXXXX and provide you with more specific information. In the meanwhile, we can offer the following general guidance, which we hope you will find helpful.

Residents of Canada are generally taxed on their worldwide income. For many, this includes income earned from business, property, or employment in another country. Therefore, as a resident of Canada you would be subject to tax on the income you receive from your business activities in XXXXXXXXXX or any distributions from the XXXXXXXXXX corporation. However, you may qualify for a foreign tax credit in respect of foreign taxes paid by you on the income taxable in Canada. In addition, as a shareholder of the XXXXXXXXXX corporation, you may have special reporting requirements in Canada in respect of the corporation.

We invite you to read the General Income Tax and Benefit Guide - 2016 for more information on reporting your income; the Foreign Tax Credit Folio and the Foreign Reporting information page to determine the reporting requirements in respect of the corporation you are planning to register in XXXXXXXXXX for purposes of carrying on a XXXXXXXXXX business in XXXXXXXXXX. The CRA website links to these documents are provided below:

General Income Tax and Benefit Guide – 2016

(http://www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-02-16e.html);

Foreign Tax Credit Folio (http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s5/f2/s5-f2-c1-eng.html); and

Foreign Reporting (http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/frgn/menu-eng.html).

Although, the above information does not confirm the income tax treatment of your particular situation, it is intended to assist you in making that determination. The CRA tries to meet the needs of all taxpayers and their advisors, however, the Canadian tax system relies on self-assessment because it is not possible to review the facts of every taxpayer's situation before he or she files a tax return.

Regards,

Julia Belova
Industry Sector Specialist
International Division, Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency
1 Front Street West, 1st floor, Toronto, ON M5J 2X6
Julia.Belova@cra-arc.gc.ca
Telephone 416-954-8531
Facsimile 613-957-2088
Government of Canada