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.
January 23, 1981
Mr. Phil Pinkus Director Provincial and International Relationships Legislation Branch Department of National Revenue Ottawa, Ontario
Dear Mr. Pinkus
Re: Canada-U.K. Income Tax Convention (1978)
Recently I was discussing a particular aspect of the convention with our international tax partner, XXXX in our Montreal office. The item under discussion was Article XIII-Capital Gains and, more particularly, paragraph 4(a) thereof, dealing with the alienation of shares other than shares quoted on an approved stock exchange deriving the greater part of their value directly or indirectly from an immoveable property situated in a Contracting State. XXXX and I did not come to any conclusion during our discussion and he suggested that I write to you as it is apparently one of your areas of expertise.
Some comments which I have read on the revisions in the taxation of capital gains would indicate that the particular writers felt the new treaty provisions only applied to real estate companies. I refer you particularly to:
(a) the editorial comment at page 27,245 of CCH Tax Service re the UK Treaty.
(b) Article taken from Volume II, Number 20 of the Canadian Taxpayer re the UK Treaty
Copies of both these references are attached.
The references seem to indicate that the new treaty provisions refer to shares of real estate companies. With respect, I am unable to ascribe this narrow meaning from my own reading. I would hesitate to do so in any event but more particularly because of the inclusion of the word "indirectly" in Article XIII of the Canada-UK Tax Convention.
The fact situation which I discussed with XXXX is as follows:
XXXX
The simple question, or perhaps not so simple, is, given the facts, would the sale of the shares by the U.K. trust bring the transaction within the ambit of Article XIII, paragraph 4(a) or was it the intention of the Canadian government only to apply the article to the sale of shares of a real estate trading company. Any comments you would care to make to clarify the Canadian government's policy in this area when negotiating the treaty would be very much appreciated.
Yours very truly,
XXXX
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