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.
February 1, 1985
BY MESSENGER
Ms. Carol Muirhead, Chief Non-Resident, Business & Property Income Section Non-Corporate Rulings Division DEPARTMENT OF NATIONAL REVENUE, TAXATION 88 Metcalfe Street 5th Floor Ottawa, Ontario K1P 5L7
Re: Application of Canada - Belgium Income Tax Convention
Dear Ms. Muirhead:
We have written concerning the application of the Canada - Belgium Income Tax Convention of 1976, (hereinafter referred to as the "Treaty"), with respect to the possible disposition by a former Canadian resident of shares held by him prior to his departure from Canada.
1. XXXX
2. XXXX
3. In preparing his terminal income tax return for the portion of 1984 in which he was resident in Canada, he proposes to make an election under Section 48(1)(c) of the Income Tax Act to treat his shares of the foreign company as taxable Canadian property. As a result of this election, there will be no departure tax on these shares, that is, our client will not be deemed to have disposed of these shares at fair market value upon leaving Canada.
4. We have been in touch with the Collections Division at Head Office. It would appear that it is acceptable for our client to sign a Trust Agreement placing these shares in escrow to meet the requirement of depositing security that is acceptable to the Minister.
5. It is our view that, should our client decide to sell his shares in future, such a transaction will be exempt from Canadian taxation under the terms of Article XIII(4) and (5) of the Treaty, primarily because the shares in question are not shares of the capital stock of a company "which is a resident of Canada", as defined therein.
6. It is our interpretation that our client would be in a position to obtain the complete release of the security held in accordance with the Trust Agreement, noted above, in such a situation. Alternately, if our client sells his shares prior to April 30, 1985, being the date he is required to file his 1984 return, he would not have to lodge any security with the Department.
7. It is our conclusion that, since treaty provisions override Canadian domestic law, there would be no Canadian tax owing on any possible capital gains from such a sale under the Treaty, as it is presently cast.
We would appreciate it if you would confirm our views on this situation.
If you have any questions or comments whatsoever, please do not hesitate to contact the undersigned.
Yours truly,
XXXX
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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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