16 June 1999 External T.I. 9912595 - YUKON MINERAL EXPLORATION TAX CREDIT - PE

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.

991259
XXXXXXXXXX Peter Lee
(613) 957-8977
Attention: XXXXXXXXXX

June 16, 1999

Dear Sirs:

Re: Permanent Establishment
Yukon Mineral Exploration Tax Credit

This is in reply to your facsimile of May 7, 1999, wherein you have requested our comments on what would be qualified as a permanent establishment in the Territory of Yukon for the purposes of the new mineral exploration tax credit (the "YMETC") under the Income Tax Act (Yukon) (the "Yukon Act").

Pursuant to the Yukon Act, "eligible taxpayer" for the YMETC for a taxation year means:

• . . a corporation that maintains a permanent establishment in the Yukon at any time in the year, other than a corporation (i) that is exempt from tax payable under this Act by reason of section 7, or (ii) that is controlled by one or more persons who are exempt from tax payable under this Act by reason of section 7...

Pursuant to the Yukon Act, "permanent establishment" means a permanent establishment as defined in the federal regulations. In other words, the expression "permanent establishment" has the meaning assigned by section 400 of the Income Tax Regulations (Canada).

It is stated in the Tax News Bulletin issued by Yukon Finance in respect of the YMETC as follows:

Corporations must be subject to Yukon income tax for the taxation year in which YMETC is claimed. This requires that a corporation maintained a permanent establishment in the Yukon at some time during the taxation year to be eligible to apply for the YMETC.

It is always a question of fact in the circumstances as whether a corporation maintains a permanent establishment in the Territory of Yukon. The Department's general views on permanent establishment of a corporation in a province or territory are stated in Interpretation Bulletin IT-177R2 dated May 4, 1984, as amended by the Special Release dated August 25, 1995, and the Income Tax Technical News No. 2 dated December 30, 1994. A copy of these is attached herewith for your reference.

The above-noted comments represent our general views on the subject matter. As indicated in paragraph 22 of Information Circular 70-6R3, these comments do not constitute an advance income tax ruling and accordingly are not binding on the Department.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch