Search - consideration

6 September 2013- 1:05pm Simultaneous exchanges of consideration on a Canadian Buyco indirect acquisition of a subject corporation generally are a bad idea Email this Content When a Canadian corporation controlled by a non-resident parent (a CRIC) makes a direct or indirect investment in a foreign "subject corporation," a corresponding deemed dividend to the parent generally can be avoided only to the extent of the cross-border paid-up capital immediately before the investment time.  Accordingly, if the non-resident parent accomplishes an acquisition of a Canco holding the subject corporation by using a Canadian Buyco and – in order to avoid extra cash movements – structures the acquisition so that there are simultaneous (i) transfers of the shares of Canco to Buyco, (ii) payments of the cash purchase price to the Canco shareholders by it on behalf of Buyco, and (iii) issuance of shares by Buyco to it in consideration for such cash payment, there generally will be a deemed dividend to it rather than a suppression of the PUC of the shares it holds in Buyco.  ...

18 June 2018- 11:31pm CRA finds that a “fee” charged by a an auto dealer for assigning a credit agreement to a lender was part of the GST/HST exempt consideration for the assignment Email this Content An auto dealer, which sold conditional sales contracts or credit agreements arising from its sales to customers to a lender, would also be paid a separately-stated fee by the lender. CRA stated: A fee received by the Dealer from a lender for the assignment of a conditional sales contract or credit agreement forms part of the consideration received for the assignment of the contract, and therefore would not be subject to the GST/HST as the assignment of the contract is an exempt supply. ...

20 June 2021- 2:35pm CRA recharacterizes a portion of the lease payments under a lease with a bargain purchase option as consideration for the option Email this Content Regarding a lease of a truck tractor with a term of 48 months and a bargain purchase option at maturity, CRA indicated that the monthly rental payments should be allocated between deductible rental payments for the use of the vehicle and consideration for the option, which would be added to the adjusted cost base of the option. ...

15 November 2015- 10:17pm Cartier House Care Centre – Tax Court of Canada finds that the GST incidental supply rule did not apply where the allocation of consideration among the components was apparent Email this Content Paris J rejected CRA arguments that an independent contractor, who provided personal care services to a B.C. for-profit residential care home, including assistance with bathing, dressing, grooming, feeding, and incontinence management, was not thereby providing a (GST-exempt) "homemaker service," which was defined to mean "a household or personal service, such as cleaning, laundering, meal preparation and child care, that is rendered to an individual who, due to age, infirmity or disability, requires assistance. ... In rejecting a submission that the incidental supply rule in ETA s. 138 effectively assimilated the otherwise-taxable activity aide services to the single supply of personal care "homemaker" services, Paris J stated that, as the hours for each service were evident on the invoice, "the consideration for each category of worker would be determinable and separate amounts" (so that there was no "single consideration") and that: …[T]he activity aide services were not incidental to the care aide services. ...

21 October 2015- 11:49pm CRA provides favourable interpretation on the ability of a Newco (which may take a while to get going) to make an ETA s. 156 nil consideration election Email this Content A member of a closely-related corporate group generally will be a "qualifying member," so as to be able to make a nil consideration election with other qualifying group members under ETA s. 156 if (under (c)(i) if the "qualifying member" definition") substantially all of its property, other than financial instruments or property with only a nominal value ("disregarded property"), has been acquired for consumption, use or supply exclusively in the course of its activities ("commercial acquisitions").   ...

9 July 2014- 1:40pm CRA state that nominal ($1) consideration taints a non-compete covenant and that a Canadian executor taints purely non-resident trusts receiving estate property Email this Content Some highlights from CRA’s responses to Questions 9 to 19 posed at the 16 June 2014 STEP Conference: Q. 9       For the time being, CRA is continuing not to charge interest where inter vivos trusts have not made instalments. ... Q. 15     The exemption in s. 56.4(6) or (7) from imputed proceeds for a restrictive covenant – which depends inter alia on no proceeds being received or receivable for the covenant – will not be available where a non-compete agreement provides for the payment of nominal ($1) consideration to the covenanter. ...

8 February 2015- 1:58pm CRA notes that no valuation is required where drilling rights are granted in consideration for a royalty Email this Content If the holder of a patent licenses it for a royalty, the royalty is only recognized as it is earned. Contrast this with an individual who grants drilling rights over his freehold property in consideration for annual royalties payable out of any oil and gas production. ...

12 April 2015- 9:06pm CRA offers streamlined procedure for validating historical GST/HST s. 156 (nil consideration) elections Email this Content Since January 1, 2015, group registrants wishing to make an ETA s. 156 election for qualifying supplies between them to be made at deemed nil consideration have been required to file their elections with CRA rather than merely signing them and keeping them on hand. ...

10 August 2016- 11:24pm CRA finds that the s. 95(2)(c) rollover is available on the drop-down of shares into a Dutch cooperative in consideration for a credit to the membership account Email this Content In 2016 IFA Roundtable Q. 10, CRA indicated that s. 95(2)(c) could apply to the drop-down of shares by a foreign affiliate to a another foreign affiliate (FA3) which was a non-share corporation even though no membership interests were issued by FA3, provided that the fair market value of the membership interest in FA3 increased by the FMV of the contributed shares. CRA has now published a somewhat similar ruling, respecting the contribution of shares of a Netherlands private limited liability company to a newly-formed Dutch cooperative (DC) in consideration for a credit to the membership accounts of the contributing foreign affiliates equal to the FMV of the contribution, in which it ruled that the s. 95(2)(c) rollover was available. ...

29 December 2016- 11:56pm CRA indicates that insurance assets transferred to a subsidiary in consideration for assuming obligations of the insurance business could qualify as “reinsurance premiums” Email this Content In the context of a tax-deferred transfer under s. 138(11.94) of an insurance business carried on in Canada to a corporation within the same wholly-owned group, s. 138(11.5)(m) provides that a reinsurance premium paid or payable by the transferor to the transferee respecting the assumed or reinsured obligations will be included or deducted, as the case may be, only to the extent that doing so may reasonably be regarded as necessary to determine the appropriate amount of income of both the transferor and the transferee. After noting that whether s. 138(11.5)(m) can apply depends, in part, on whether the drop-down occurs under a reinsurance arrangement, CRA stated that “the assets transferred by the transferor to the transferee in exchange for assuming the transferred obligations may be a ‘reinsurance premium’” (although that term could also extend to “any amounts paid or payable to the transferee as consideration for the assumed obligations in respect of the transferred insurance business.”) ...