Search - consideration

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.”) ...

9 July 2016- 9:45pm Oil Search consideration for InterOil shares would include a substantial contingent cash payment based on how big InterOil’s natural gas resource turns out to be Email this Content Oil Search, a Papua New Guinea (“PNG”) corporation listed on the Australian Stock Exchange and whose ADSs trade over the counter in the U.S., is proposing to use a newly-incorporated Yukon subsidiary to acquire (under a Yukon Plan of Arrangement) InterOil, which is a Yukon corporation listed on the NYSE but essentially all of whose assets are natural gas assets held in a PNG subsidiary. The consideration incudes not only Oil Search shares or cash (subject to a U.S.$770M cap) but also “contingent value rights,” which will trade on the ASX and will entitle the holder to a cash payment based on the extent to which an interim resource assessment of a PNG natural gas project of InterOil shows a resource of greater than 6.2 trillion cubic feet equivalent ("tcfe"). ...

14 May 2018- 12:09am CRA finds that making the ETA nil consideration election can have punitive results respecting GST/HST on related employee benefits Email this Content Although ETA s. 173(1) often imputes a taxable supply by an employer based on the amount of taxable benefits conferred by it under ITA s. 6(1)(a), s. 173(1)(d)(i) provides that this rule does not apply where the employer was denied an input tax credit under s. 170 on its acquisition of the property or service that, in turn, was provided to the employee. ... CRA found that this s. 173(1)(d)(i) exclusion did not apply where the property in question (an automobile) was acquired by a closely-related corporation and then leased to the employer with the benefit of the s. 156 nil-consideration election, with the automobile being provided for the exclusive personal benefit of an employee. ...

28 January 2019- 11:43pm CRA confirms that it will not apply s. 112(3) to a dividend that has been subjected to s. 55(2) and discusses animating policy considerations Email this Content In its published comments on its further conclusions on various questions posed to it on the s. 55(2) rules, CRA provided some more detail than in its oral presentation at the 2018 Annual Conference. ... CRA also was more loquacious on the policy considerations underlying its interpretations. ...

7 March 2021- 11:10pm Engineering Analysis Centre – Supreme Court of India finds that consideration for software paid by Indian resellers was not royalties for Canadian (and other) Treaty purposes Email this Content The OECD Commentary on the royalty article (Art. 12) states i nter alia that “where a distributor makes payments to acquire and distribute software copies (without the right to reproduce the software),” such payments generally “would be dealt with as business profits in accordance with Article 7” rather than as royalties under Art. 12 – and that this would be so “regardless of whether the copies being distributed are delivered on tangible media or are distributed electronically (without the distributor having the right to reproduce the software).” Nariman J considered a multitude of appeals, principally involving consideration paid to non-residents (who were respective Treaty residents in 18 different countries including Canada) by: Indian end-users for the purchase of software (for example, a non-exclusive licence to use Samsung software on the end-user’s Samsung mobile device, with a prohibition against making the software available to any other person); or Indian (or non-Indian) distributors for resale to Indian end-users or other Indian distributors. ...

5 October 2022- 10:57pm If commercially feasible, deferred share consideration can be used instead of a share sale occurring on a cash earnout basis Email this Content Some points made on share sale earnouts, or achieving their equivalent without having to address s. 12(1)(g), include: The contingent payment terms can be embedded in the terms of special shares issued by the Canadian purchaser, thereby permitting s. 85(1) rollover treatment, and with a Callco needed in the buyer structure to avoid Pt. ... However, the election form (T2057) creates difficulties in that it refers only to the “share consideration” rather than also including rights to receive shares in that quoted phrase. ...

(f) exclusion from disposition re a transfer for no consideration to new trust for the same special-needs minor beneficiary Email this Content A special-needs minor child (CC4), who was the sole beneficiary of an inter vivos trust for the child’s exclusive benefit, held non-voting Class A common shares of a holding company (Fco), with CC4’s three siblings holding the other Class A shares directly. ... Fco makes a PUC distribution to the trust by distributing a note of a subsidiary in an amount sufficient for the trust to pay the tax on the above taxable dividend. the father of CC4 settles a new trust for the exclusive benefit of CC4, with the old trust transferring its Class Z shares of Fco to the new trust for no consideration, and with the new trust not electing out of the application of para. ...

30 May 2017- 1:14am Lumenpulse privatization contemplates cash consideration for its majority public shareholders and a share-for-share exchange for 38% of its shareholders Email this Content Under the proposed privatization of TSX-listed Lumenpulse pursuant to a CBCA Plan of Arrangement, the public shareholders would receive cash for their common shares, and the specifically-listed “Rollover Shareholders” (holding 38% of the common shares) would receive common shares of the newly-incorporated purchaser, which is an indirect subsidiary of Power Corporation of Canada. ...