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: Would a change in the statutory and taxation year end used by a foreign affiliate for purposes of tax reporting in the country in which the affiliate is resident, result in a change to the affiliate's "taxation year" for purposes of the Act and Regulations.
Position: Generally yes.
Reasons: The definition in subsection 95(1) is vague. However, the context of foreign affiliate legislation and Regulations supports this interpretation.
XXXXXXXXXX 2000-003677
Olli Laurikainen
Attention: XXXXXXXXXX
July 12, 2000
Dear Sirs:
Re: Subsection 95(1) of the Income Tax Act (the "Act") -
Definition of "Taxation Year" of a Foreign Affiliate
This is in reply to your letter wherein you request our views in reference to the following hypothetical scenario.
1) Canco, a corporation resident in Canada has held the shares of FA, a foreign affiliate of Canco, for several years.
2) The statutory year end of FA has been December 31 since FA was incorporated and FA has used that year end for tax reporting purposes in its country of residence.
3) FA effects a change in its statutory year end under the corporate laws of the country in which it is incorporated from December 31 to June 30. In addition, its taxation year end under the income tax law of the country in which it is resident is also changed to June 30.
You request our view whether the "taxation year" year of FA for the purpose of the definition in subsection 95(1) and for the purpose of computing FA's surplus accounts under sections 5900 to 5907 of the Regulations to the Act would end June 30 effective after the transaction described in paragraph 3 above.
It is our view that in the above circumstances, FA would have a new "taxation year" ending June 30 for the purposes of the definition in section 95(1) of the Act, effective after the changes referred to in paragraph 3 above and such taxation year would be applicable for the purpose of computing FA's surplus accounts under sections 5900- 5907 of the Regulations.
The foregoing comments are given in accordance with the practice referred to in paragraph 22 of information Circular 70-6R3 and are not binding on the Canada Customs and Revenue Agency.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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