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.
QUESTION
27. Net profits interests ("NPI") have usually been treated as resource royalties by Revenue Canada. Would the Department consider an NPI to be a production royalty under subsection 1206(1) of the Income Tax Regulations (the "Regulations") if the recipient of the NPI were to retain some form of ownership interest in the land?
ANSWER
27. The Department would consider the NPI to be a production royalty where the recipient of the NPI (the "taxpayer") has a Crown royalty (in respect of subparagraph (a)(i) or (ii) of the definition of production royalty in subsection 1206(1) of the Regulations) and it is reasonable to consider that the taxpayer would have had the Crown royalty if the taxpayer's only source of income had been the NPI.
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© His Majesty the King in Right of Canada, 1991
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© Sa Majesté le Roi du Chef du Canada, 1991
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