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.
June 11, 1985
XXXX
Further to your letter of May 15, and as discussed after the IFA Seminar on May 14, I enclose written versions of the answers that Keith Harding and I gave at the seminar to questions received in advance (10) and from the floor (3), and of our comments on four issues of current interest.
Regards
C.J. Muirhead Chief Non-Resident, Business & Property Income
Canada-United States Income Tax Convention
Q. Article XXI paragraph 2 provides an exemption from withholding tax for dividends and interest derived by certain trust companies or other organizations. Paragraph (a) refers essentially to institutions which are constituted and operated exclusively to administer or provide benefits under one or more pension plans. Paragraph (b) refers to an institution which is not taxed in the state of residence and is constituted and operated exclusively to earn income for the benefit of an organization referred to in (a).
(1) What is the difference between "generally exempt from tax in a taxable year" in paragraph (a) and "not taxed in a taxable year" paragraph (b)? Does the latter expression refer to the factual tax liability and the former exemption as such?
(2) The drafting of paragraph (b) suggests that the organization must earn income for the benefit of "an organization" rather than "'organizations" referred to in paragraph (a). Is it actually intended that the paragraph (b) exemption applies solely to an organization which operates for the benefit only of a single pension plan or would comprehend a kind of fund of-funds, an organization which pools moneys provided that all of the beneficiaries are themselves pension plans exempt under paragraph (a)?
A. (1) "Generally exempt" refers to the possibility that otherwise exempt organizations may be subject to special taxes, such as the tax under Part XI (in respect of foreign property). "Not taxed in the taxable year" refers to the factual situation; e.g. pooled fund trusts, which are conduits for tax purposes may have no factual tax liability in respect of a taxable year.
(2) As indicated above, paragraph (b) was intended to apply to such pooled fund arrangements (i.e. for a number of exempt organizations).
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© Her Majesty the Queen in Right of Canada, 1985
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© Sa Majesté la Reine du Chef du Canada, 1985
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