2 May 1988 Income Tax Severed Letter 5-5805 - [Application of Section 219.2 of the Income Tax Act]

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.

XXXX
O.S. Laurikainen 
                                    (613) 957-2125   

May 2, 1988

Dear Sirs:

Re: Application of Section 219.2 of the Income Tax Act (the "Act")

This is in reply to your letter of March 22, 1988. You have requested our opinion whether the reduction in the rate of Part XIV tax permitted under section 219.2 of the Act, can be applied where a corporation emigrates to the United States and is therefore subject to Part XIV tax under the provisions of section 219.1 of the Act.

The provisions of section 219.1 of the Act apply to a taxation year which, by virtue of section 88.1 of the Act, is deemed to end immediately before the corporation becomes resident of a jurisdiction outside Canada. Section 219.2 of the Act provides for a reduced rate of Part XIV tax in respect of taxation year to which a tax agreement or convention applies.

Since section 219.1 of the Act only applies to the corporation's taxation year which ended immediately before emigrating, it is our view that in such taxation year an agreement or convention will not apply because the corporation is only resident in Canada. Accordingly, the 'corporation will be required to pay part XIV tax at a rate of 257 as calculated under the provisions of section 219.1 of the Act.

We trust that this is the information you requested.

Yours truly,

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch