17 October 2002 External T.I. 2002-0157355 - Resident in U.S. for Treaty Purposes

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Whether a foreign corporation which was continued into the State of Delaware is a resident of the U.S. for the purposes of the Canada-United States Income Tax Convention?

Position: Yes.

Reasons: It meets the requirements set out in paragraph 1 of Article IV of the Convention.

XXXXXXXXXX 2002-015735
S. Leung
October 17, 2002

Dear XXXXXXXXXX:

Re: Residence in the United States for the Purposes of the Canada-United States Income
Tax Convention (the "Convention")

We are writing in reply to your letter of August 7, 2002, in which you requested our view as to whether the corporation described below would be considered to be a resident in the U.S. for the purposes of the Convention.

"NRco" is a corporation that is a not resident in Canada for the purposes of the Convention. NRco was incorporated in the Netherlands Antilles and was subsequently continued into the State of Delaware, U.S.A.

Pursuant to the Internal Revenue Code of the U.S. (the "IRC"), a domestic corporation is liable to pay tax in the U.S. on its worldwide income. The term "domestic corporation" is defined for the purposes of the IRC to mean, inter alia, a corporation which was incorporated or organized under the U.S. Federal or state law.

For the purposes of the IRC, NRco is considered to be organized under the laws of Delaware by virtue of having been continued in that state, although it has not been considered to have been incorporated in Delaware. As a result, NRco is considered to be a domestic corporation for the purposes of the IRC and is, thus, liable to pay tax in the U.S. on its worldwide income.

The corporations legislation of the Netherlands Antilles may continue to apply to NRco.

Our Comments

The situation outlined in your letter appears to relate to an actual situation involving an identifiable taxpayer. Accordingly, the applicable Tax Services Office should be consulted with respect to the income tax liabilities of such a taxpayer. However, we can offer the following general comments.

It is our opinion that under the fact scenario described above, NRco is considered to be a resident of the U.S. for the purposes of the Convention.

As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, the opinions expressed in this letter are not rulings and are consequently not binding on the Canada Customs and Revenue Agency.

Yours truly,

for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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