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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether the withholding tax exemption under 212(1)(b)(vii) continues to apply after a wind-up subject to subsection 88(1)
Position:
Yes
Reasons:
Due to the application of 87(7) and 88(1)(e.2)
XXXXXXXXXX 961198
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1996
Dear Sirs:
Re: XXXXXXXXXX
This is in reply to your letters of XXXXXXXXXX wherein you requested an advance income tax ruling in respect of the above-noted taxpayer.
All statutory references herein are references to the Income Tax Act (Canada) (the "Act") unless otherwise stated.
Our understanding of the statements of facts and proposed transactions is as follows:
Facts
1.XXXXXXXXXX is a corporation resident in the U.K. and a wholly-owned subsidiary of XXXXXXXXXX head office is XXXXXXXXXX is the U.K. holding company for XXXXXXXXXX Canadian group of companies (the "Canadian Group"). XXXXXXXXXX owns all of the shares of XXXXXXXXXX is a taxable Canadian corporation as defined in subsection 89(1) of the Act.
2.The address and account number of XXXXXXXXXX is as follows:
XXXXXXXXXX
XXXXXXXXXX
The tax returns of XXXXXXXXXX are handled by the XXXXXXXXXX Taxation Centre and the XXXXXXXXXX District Taxation Office.
3.XXXXXXXXXX, which was incorporated under the laws of the Province of XXXXXXXXXX holds both direct and indirect investments in a number of Canadian subsidiary corporations. The relevant subsidiaries for the purpose of this ruling request are XXXXXXXXXX has other subsidiaries all of which, with the exception of XXXXXXXXXX are either inactive or have immaterial assets and liabilities.
4.XXXXXXXXXX is a corporation amalgamated under the laws of XXXXXXXXXX and is a wholly-owned subsidiary of XXXXXXXXXX is a holding and investment company. It has one active wholly-owned subsidiary, XXXXXXXXXX, and a number of other wholly-owned subsidiaries which are either inactive or have immaterial assets and liabilities. These other subsidiaries are not relevant for the purposes of this request.
5.XXXXXXXXXX is a corporation incorporated under the laws of the Province of XXXXXXXXXX operations include the XXXXXXXXXX owns several subsidiaries, one of which is XXXXXXXXXX.
6.A corporate reorganization (the "Reorganization") of the Canadian Group is planned in order to rationalize the corporate structure, and one of the steps to be undertaken in the course of the Reorganization will result in the merger of XXXXXXXXXX While it had been management's intention that the Reorganization should be completed by the end of XXXXXXXXXX, or as soon as practicable, this has not yet been possible owing to delays XXXXXXXXXX.
7. XXXXXXXXXX.
8.By reason of XXXXXXXXXX not being required to repay more than 25% of the principal amount of the Bonds within five years of the date of their issue, the Offering Circular relating to the Bonds represented to potential purchasers that interest evidenced by the Coupons and paid or credited on the Bonds or deemed to be paid or credited in respect of the Bond or Coupons to non-resident holders will not be subject to Canadian non-resident withholding tax. This representation as to Canadian Taxation was included in the Offering Circular solely on the basis of your firm's opinion as Legal Advisers to the Issuer and the Guarantor in Canada, that the Bonds meet the requirements of subparagraph 212(1)(b)(vii) of the Act. No ruling or other comfort has previously been sought from Revenue Canada confirming the application of this exemption to the Bonds.
9. XXXXXXXXXX.
10. XXXXXXXXXX.
Proposed Transactions
11.As noted above in paragraph 6, the Reorganization has been planned in order to rationalize the corporate structure. To effect the reorganization it is proposed that the following steps be implemented:
(a) XXXXXXXXXX will incorporate a new wholly-owned subsidiary ("XXXXXXXXXX") under the laws of the Province of XXXXXXXXXX;
(b) Immediately after the transaction described in (a), XXXXXXXXXX will undertake a share for share exchange under subsection 85(1) of the Act under which XXXXXXXXXX will issue common shares to XXXXXXXXXX in exchange for all of the issued and outstanding shares of XXXXXXXXXX;
(c) Immediately after the transaction described in (b), XXXXXXXXXX will be wound up into XXXXXXXXXX under subsection 88(1) of the Act;
(d) Immediately after the transaction described in (c), XXXXXXXXXX will amalgamate with XXXXXXXXXX ("Amalco") under section 87 of the Act.
Purpose of Proposed Transactions
12.The purpose of the proposed transactions is to eliminate an unnecessary holding company, and to rationalize and simplify the corporate structure of the XXXXXXXXXX Canadian Group under a single holding corporation, by merging XXXXXXXXXX in a manner that preserves unclaimed tax pool balances of XXXXXXXXXX within a merged entity for possible future use.
XXXXXXXXXX
13. XXXXXXXXXX.
14. XXXXXXXXXX.
To the best of your knowledge and that of the taxpayers involved, none of the issues involved in this ruling request is being considered by an office of Revenue Canada in connection with a tax return already filed, and none of such issues is the subject of any notice of objection or is under appeal.
Ruling
Provided that the preceding statements constitute a complete and accurate disclosure of the relevant facts and proposed transactions and purpose of proposed transactions we confirm as follows:
Provided that interest paid to arm's-length non-resident Holders of the Bonds is currently exempt from Canadian non-resident withholding tax by reason of subparagraph 212(1)(b)(vii) of the Act, such interest paid by Amalco to arm's-length non-resident Holders of the Bonds will continue to be exempt thereunder provided that the provisions of subsection 87(7) and paragraph 88(1)(e.2) of the Act are applicable to the transactions described in paragraph 11 above.
The above ruling is given subject to the general limitations and qualifications set out in Information Circular 70-6R2 dated September 28, 1990, and is binding on Revenue Canada, Taxation, provided that the proposed transactions described herein are completed before XXXXXXXXXX. Our ruling is based on the Act in its present form and does not take into consideration any proposed amendments to the Act.
Nothing in this letter should be construed as our confirmation of the tax consequences of any transaction except those consequences expressly confirmed above. In particular, we are not confirming the tax consequences that may arise from the transactions referred to in paragraph 11 above.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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