Table of Contents

See Also

Anson v. HMRC, [2015] UKSC 44

profits of LLC earned directly by members

Lord Reed found that that the profits of a Delaware LLC belonged to the members as they arose, so that a UK member was taxed on the "same" income in both countries. See summary under Art. 24.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 24 UK LLC member had a personal (non-proprietary) entitlement to his share of LLC profits as they arose 485
Tax Topics - Treaties - Income Tax Conventions - Article 3 scheme in Treaty article for allocating income between jurisdictions amounted to a definition of "source" 88
Tax Topics - Treaties - Income Tax Conventions - Article 4 pragmatic approach to determining "same" - also appearing in IV,7(b) of Cda-US Treaty 142

HMRC v. Anson, [2013] EWCA Civ 63, rev'd supra

LLC not fiscally transparent

The taxpayer, who was resident in the UK, paid US income taxes on his share of the profits of an LLC of which he was a member, and also paid UK income taxes on income remitted to the UK including such share of the LLC's profits. He would have been entitled to relief under Art. 23 of the UK-US Double Tax Convention from UK tax on such profits if the UK tax was "computed by reference to the same profits or income by reference to which the United States tax [was] computed."

In finding that this requirement was not satisfied, given that the distribution of the profits to the taxpayer (so as to attract UK tax) was distinct from the earning of the profits by the LLC in the first place (resulting in the US tax), i.e., the LLC was fiscally transparent for US but not UK purposes, Lady Justice Arden stated (at para. 57):

If profit is earned by an entity, and the source of the profit to the taxpayer as a member of that entity is a contract as between him and other members, then in the usual case it follows that the source of his income must be a different source of income from that of the entity itself. The fact that there is a contract generally suggests that there is a disposition of a right to the profits from one person to another. That result can be avoided if the member had a proprietary right to the profits as they arose. This would as I see it generally be the case where income accrues to a trust under which an income beneficiary has an interest in possession, or to a unit trust or collective investment scheme, if the investors have a beneficial interest in the assets that are subject to the unit trust or scheme.

In the case of the LLC, there was was "nothing to suggest that it did not have unqualified ownership of its assets or that its members had any interest in those assets" (para. 77). She furher stated (at para. 64):

It would be unusual but not impossible for an entity with a separate legal personality, such as a company, to be tax transparent for English law purposes. One example would be the Scottish partnership where the partnership is a separate legal entity and holds the assets of the business, but the partners have an (indirect) interest in the assets and carry on business in common: this has been held by this court to be tax transparent....

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 24 LLC not transparent 437

Hague v. Cancer Relief & Research Institute, [1939] 4 DLR 191 (Man. K.B.)

corporation has separate legal personality

In finding that an institute which section 2 of the Cancer Relief Act, 1930 (Manitoba) purported to make a "body corporate" was not, in fact, a corporation because there were no natural persons to compose or to constitute the corporation, Dysart J. stated (pp. 193-194):

"What is a corporation? According to our system of law, a corporation is a group or series of persons which by a legal fiction is regarded and treated as a person itself. It is a legal entity composed of persons. In law 'a person' is any being that is capable of having rights and duties, and is confined to that. Persons are of two classes only - natural persons and legal persons. A natural person is a human being that has the capacity for rights or duties. A legal person is anything to which the law gives a legal or fictitious existence and personality, with the capacity for rights and duties. The only legal person known to our law is the corporation - the body corporate."

Words and Phrases
corporation person

Administrative Policy

17 May 2022 IFA Roundtable Q. 8, 2022-0926431C6 - Foreign Entity Classification

materials that should accompany an entity-classification ruling request

Given the recent CRA' announcements on US LLLP classification and the introduction of anti-hybrid mismatch rules in countries like Luxembourg, which may apply depending on how Canada treats a particular Luxembourg entity for tax purposes (e.g., a Luxembourg special limited partnership), will CRA publish and maintain an online list of foreign entities that CRA has classified?

CRA noted that under its two-step approach to entity classification, it “examines the nature of the relationship between the various parties that are involved and their rights and obligations in respect of the foreign entity or arrangement under the applicable law and documentation,” and that as the classification of particular foreign entities or arrangements is thus “to be determined on a case-by-case basis” this “does not generally lend itself well to the type of standard or universal classification requested by this question”: it will “not be in a position to publish and maintain an online list of foreign entity or arrangement classifications.”

Taxpayer’s seeking a ruling in this regard should:

include with their request a complete description of the characteristics described above, their analysis as to the proper classification of the entity or arrangement for purposes of the [ITA] along with a discussion on the way their relevant provisions would appropriately apply to proposed transactions involving or affecting the rights and obligations of the entity or arrangement and its stakeholders, a copy of the foreign legislation applicable to the entity or arrangement and any other relevant documents described above.

27 October 2020 CTF Roundtable Q. 9, 2020-0866671C6 - entity classification of UK LLP

a UK LLP is a corporation in light of its separate legal personality and sole responsibility for debts and conduct of business

Under the UK’s Limited Liability Partnerships Act 2000, a limited liability partnership (“UK LLP”) is treated in the UK as a separate legal entity, but the profits of its business are taxed as if the business were carried on by partners in partnership, rather than by a body corporate

CRA stated that it would consider the UK LLP to be a corporation. Under its two-step approach, it looks at the entity’s characteristics under foreign law, and at the characteristics of different forms of association under Canadian commercial law. Having regard to the following attributes of the UK LLP, it would be regarded as a corporation:

  • A UK LLP has a legal existence separate from its members.
  • A UK LLP, and not its members, carry on the business.
  • A UK LLP, and not its members, acquires and owns property in its own name for use in its business, and is responsible for any debts or obligations incurred as a result of carrying on its business.
  • The capital of a UK LLP serves the same function as the share capital of a corporation.
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 UK LLP has the attributes of a corporation rather than a partnership 107

1 August 2019 External T.I. 2018-0768561E5 - Application Administrative Position on US LLPs & LLLP

LLLPs cannot be viewed as corporations solely on a prospective basis

2017-0691131C6 stated that one of the conditions for allowing Delaware or Florida LLLPs formed before April 26, 2017 to file as a partnership was that “no member of the entity and/or the entity itself takes inconsistent positions from one taxation year to another … between partnership and corporate treatment.” Two LLLPs (held by Canadian resident corporations) that had filed as partnerships for Canadian tax purposes since the time of their formation proposed to now treat themselves as corporations on a prospective basis. CRA found that this would violate such condition (“the change by the LLLPs from partnership to corporate treatment constitutes taking an inconsistent position from one taxation year to the next”) and added:

As stated at IFA 2017, where any of these conditions is not met in respect of any such entities formed before April 26, 2017, the CRA may issue assessments or reassessments to the members and/or the entity, for one or more taxation years, on the basis that the entity was always a corporation.

The LLLPs will not be viewed as corporations for Canadian tax purposes on a solely prospective basis.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 no ability for an otherwise grandfathered LLLP to treat itself prospectively as a corporation 216

16 May 2018 IFA Roundtable Q. 8, 2018-0749481C6 - Update on Entity Classification

French société en commandite simple (SECS) a corp

CRA also declined to rule that a specific French SLP (Société de Libre Partenariat) that was a société en commandite simple was a partnership for ITA purposes, and apparently viewed it as a corporation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 French limited partnership viewed as corp/grandfathering relief re LLPs/LLLPs 327

13 February 2017 Internal T.I. 2015-0568011I7 - Classification of Florida LLLP

Florida LLLPs found to be corporations

After providing a detailed description of the relevant provisions of the Florida Revised Uniform Limited Partnership Act of 2005 respecting LLLPs, including distinct entity status, perpetual duration and limited liability of the general partner, the Rulings Directorate concluded that two Florida real estate LLLPs had been corporations, but nonetheless suggested that they be treated as partnerships for the years in question given the transitional relief announced in 2016-0642051C6,

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 Florida real estate LLLPs were corporations (subject to transitional relief) 477

13 February 2017 Internal T.I. 2015-0587691I7 - Classification of a Delaware LLLP

de facto listing of relevant corporate-like attributes of LLLP

A secondary assessing position of a TSO was that a Delaware LLLP, which had been wound-up, had been a corporation for ITA purposes. In the course of confirming this characterization, the Directorate provided a detailed listing of the relevant provisions of the Delaware legislation (the DRULPA), as well as summarizing the (unexceptional) features of the partnership agreement. The Directorate went on to note that since it had recently determined to provide grandfathering relief re the application of its position to existing LLPs and LLLPs (see 2017 IFA Roundtable, Q.3), it recommended against treating this LLLP as having been a corporation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 Delaware LLLP that was wound up before 2016 treated as partnership for capital loss purposes 402

26 April 2017 IFA Roundtable Q. 3, 2017-0691131C6 - U.S. LLPs and LLLPs

general grandfathering of pre-April 26, 2017 LLPs and LLLPs

CRA further extended its grandfathering relief from its view of Florida and Delaware LLPs and LLLPs as corporations, so that any such entities formed before 26 April 2017 would be accepted as partnerships for all prior years as well as all future years, provided that none of the following applies:

  • one or more members of the entity, or the entity itself, takes inconsistent positions from one taxation year to another, or for the same taxation year, as between partnership or corporate treatment;
  • there is a significant change in the membership or the activities of the entity; or
  • the entity is being used to facilitate abusive tax avoidance.
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 further extension of grandfathering relief for Florida and Delaware LLPs and LLLPs 182
Tax Topics - Treaties - Income Tax Conventions - Article 4 Florida and Delaware LLPs and LLLPs treated like LLCs 28
Tax Topics - Income Tax Act - Section 93.2 - Subsection 93.2(2) Florida and Delaware LLPs and LLLPs subject to s. 93.2 23

29 November 2016 CTF Roundtable Q. 10, 2016-0669751C6 - U.S. LLPs and LLLPs

potential prospective filings of LLPs/LLLPs as corps

Where a Florida or Delaware LLP and LLLP is precluded from converting to a “true” partnership, CRA will entertain submissions to allow it to file as a corporation on a going-forward basis while leaving the previous years’ filings unchanged. CRA will review such submissions to see that there is no unwarranted benefit or undue tax advantage, including a review of the relevant tax attributes.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 CRA may allow LLPs and LLLPs to file as corps only on a going-forward basis 157

1 December 2015 Internal T.I. 2015-0588381I7 F - Classification of US-LLCs

status of Delaware, NY and Florida LLCs as corps not affected by Quebec residence of member

A Quebec individual resident was a member of Delaware, New York and Florida LLCs. His representatives submitted that in light of Backman and the introduction of s. 8.1 of the Interpretation Act, and on the basis of a comparison of the attributes of a partnership under the Quebec Civil Code (“QCC”), which were relevant in light of the individual's residence, and those of the LLCs, that the LLCs were partnerships for purposes of the application of the Act to the individual. In rejecting this submission, CRA stated (TaxInterpretations translation):

[W]e are maintaining our position… that they should generally be considered as corporations for the purposes of the Act under the two-step approach outlined above. …

[W]e are not convinced that a comparative analysis involving partnerships governed by the QCC by itself supports the conclusion submitted by the representatives… . However, if it were determined that such a comparative analysis supported the conclusion that a US LLC must be considered as a partnership for the purpose of application of the Act, we suggest that it would not be appropriate to adopt a classification approach to entities and foreign arrangements which could result in a different classification according to the province or territory of the residence (or permanent establishment) of the taxpayer holding an interest in the entity or the arrangement. Otherwise, for example, simply changing the province or territory of residence or the establishment would be susceptible to the triggering of complex and onerous tax consequences to the taxpayer involved. …

[I]t appears to us, based in particular on the conflict of law rules, that the provincial and territorial laws of property and civil rights in Canada provide for mutual recognition of different types of entities or arrangements established under the respective jurisdictions of the various provinces and territories, thus providing an expanded base for analysis that is uniform across Canada for the purposes of applying the two-step approach.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 corporation/partnership classification of foreign entity not affected by Quebec residence of member 233
Tax Topics - Statutory Interpretation - Interpretation Act - Section 8.1 8.1 effected no change/2 step-approach should be inter-provincial 277

2016 Ruling 2015-0571441R3 - Dutch Cooperative - 93.2 & 95(2)(c)

Dutch cooperative whose articles limited member liability was a corp

Before ruling that the contribution of shares of a Netherlands private limited liability company to a newly-formed Netherlands cooperative (Dutch Co-op, or "DC"), in consideration for a credit to the membership accounts of the contributing foreign affiliates, was eligible for s. 95(2)(c) rollover treatment, CRA ruled that DC was a corporation for the purposes of the Act, and a non-resident corporation without share capital for purposes of s. 93.2.

In connection with this ruling, the factual description noted the following:

  • Upon the registration of the notarial deed with the commercial register, DC will be regarded as a legal entity that exists separately from its members under the Dutch Civil Code and the Netherlands domestic income tax law.
  • The Articles will provide that each member must make capital contributions to DC as unanimously agreed upon by all members, the number of votes that a member may cast at a general meeting of members will generally be proportionate to its percentage of ownership in DC, a distribution of retained profits will only be made with the unanimous agreement of all members and such distribution will be proportional to the respective ownership percentages, and the members will not be liable for any debts or losses incurred by DC that are in excess of their required contributions to the capitalization of DC.
  • The Dutch Civil Code provides that “a Dutch cooperative may, by its articles of association, exclude or limit to a maximum, any liability of its members or former members to contribute to a deficit.”
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(c) rollover is available on joint drop-down of shares of a Dutch private limited liability company into a Dutch cooperative in consideration for respective credits to the membership accounts 502
Tax Topics - Income Tax Act - Section 93.2 - Subsection 93.2(2) membership interest in Dutch cooperative ruled to be shares 92
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Controlled Foreign Affiliate non-resident subsidiaries CFAs of bottom-tier Cdn partnership and FAs of Canadian corporate partners 130
Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) joint contribution of shares of FA to Netherlands co-op in consideration for credits to their respective membership accounts deemed to be for share consideration 57

21 June 2016 Internal T.I. 2015-0581151I7 - Dutch Co-Op Entity Classification

Dutch co-op a corporation

A taxpayer holds an interest in a Dutch Co-Op. Is it a partnership or a corporation? After referring to the two-step approach to entity classification, the Directorate stated:

Based on our analysis of the Deed, the Annual Report and the Dutch Legislation, provided that the Dutch Co-op complies with the Dutch Legislation, it is our view that the Dutch Co-op is a corporation for purposes of the Act.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 Dutch co-op a corp., not partnership 45
Tax Topics - General Concepts - Foreign Law two-step approach applied to finding Dutch co-op a corporation 103

10 June 2016 STEP Roundtable Q. 8, 2016-0634951C6 - U.S. LLPs & LLLPs Classification

perhaps potential flexibility in applying the transition of LLPs from partnerships to corporations

CRA largely repeated its position immediately below in 2016 IFA Roundtable, Q. 1 (as well as indicating that Anson has not changed its views on LLCs). One change was that after listing the four conditions respecting when it will continue respecting an LLP or LLLP as a partnership, CRA added that “where some but not all of those conditions are met, those cases may be dealt with on a facts and circumstance basis.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 facts and circumstances test respecting transition of LLPs to corporation status 160

29 April 2015 External T.I. 2014-0532691E5 F - Vente – immeuble - syndicat copropriétaire

community of condominium owners is treated by the Civil Code as a legal person, and is a corporation

A syndicate of co-owners holding condominium units sold one of the condominiums at a capital gain and distributed the gain to its members. CRA stated:

[U]nder section 1039 of the Civil Code of Québec (the "C.c.Q."), the community of co-owners of a building held as condominiums constitutes a legal person, called a syndicate, whose object is the preservation of the immovable. The position of the CRA since the introduction of section 1039 C.c.Q. is to consider that a syndicate of co-owners is a "corporation" for the purposes of the Act.

CRA went on to find that as a “shareholder” under s. 248(1) includes a member, such distribution would give rise to a shareholder benefit.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) distribution of gain to members of a condominium syndicate gave rise to a shareholder benefit 77
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(l) a syndicate of condominium co-owners could qualify as a s. 149(1)(l) corporation, so that a capital gain realized by it on a condo sale would be exempt 151

2015 Ruling 2014-0541951R3 - Foreign Affiliate Debt Dumping

proportionate distribution by LLP treated as dividend

A (presumably U.S.) limited liability partnership (FA1) will pay a distribution proportionately to its partners who directly comprise (i) a limited partner corporation (Canco9), and (ii) a general partner which is a general partnership - whose partners on a s. 212.3(25) look-through basis are two other Canadian corporations in the same group (Canco7 and Canco8). The CRA ruling letter described FA1 as a (non-resident) subject corporation rather than as a Canadian partnership, described the proportionate distribution as being deemed by s. 90(2) to be a dividend and provided a ruling that the distribution will be considered to be received as a dividend in respect of a single class of shares of capital stock of FA1 by Canco7, 8 and 9 for the purposes of s. 212.3(9)(b)(ii) – A(B).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(9) - Paragraph 212.3(9)(b) - Subparagraph 212.3(9)(b)(ii) s. 212.3(9)(b)(ii) PUC restoration for upper-tier QSCs on the payment by a U.S. LLP of a proportionate “dividend” to lower tier CRIC partners 349
Tax Topics - Income Tax Act - Section 90 - Subsection 90(2) proportionate LLP distribution to three direct or indirect general or limited partners treated as dividend on single class of shares 110
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(3) two Canadian corporate partners immediately beneath the U.S. border are QSCs respecting investments made by lower-tier CRICs in a U.S. LLP 238

21 July 2017 External T.I. - General answer for Delaware/Florida Working Group Submissions / Questions

CRA elaborates on its grandfathering of LLPs and LLLPs
21 July 2017 Email of the CRA Delaware/Florida Working Group to Michael Kandev

At the 2017 IFA Roundtable, CRA announced that it will allow Delaware & Florida LLPs and LLLPs formed before April 26, 2017 to continue filing as...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 CRA elaborates on its grandfathering of LLPs and LLLPs 276

26 May 2016 IFA Roundtable Q. 1, 2016-0642051C6 - Classification of U.S. LLPs & LLLPs

Delaware and Florida LLPs and LLLPs as corporations

CRA indicated that it has finalized its view that Florida and Delaware limited liability partnerships and limited liability limited partnerships are corporations for ITA purposes in light inter alia of their separate legal personality and limited liability for all members (and noted that "we see little substantive difference between LLPs, LLLPs and LLCs governed by the laws of the states of Florida and Delaware." However, CRA is prepared as an administrative matter to continue accepting that an existing LLP or LLLP (that had been formed from scratch, rather than being converted from an LLC) is a partnership if it is clear that the members are carrying on business in common with a view to profit, they intended for the entity to be a partnership, all members and the entity itself have been treating the entity for ITA purposes as a partnership, and the LLP or LLLP converts to an entity recognized by CRA as a partnership before 2018.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 LLPs and LLLPs treated as corporations 341

4 October 2010 Internal T.I. 2008-0289461I7 - Netherlands Antilles private foundation

Netherlands Antilles private foundation qualifies as a trust notwithstanding its separate legal personality

Although a Netherlands Antilles private foundation had separate legal personality (including a separate legal entity clause in the governing legislation) and capacity to acquire rights and liabilities (with no beneficiary liability), CRA nonetheless considered it to be a trust rather than a corporation given that it did not issue shares, the beneficiaries did not pay for their interests in the foundation, they could not transfer their beneficial interests and they did not have a right to participate in any decisions of the foundation. Although it was still quite dissimilar to a common law trust, it was sufficient that it was somewhat similar to a civil law trust.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) Netherlands Antilles private foundation qualifies as trust notwithstanding separate legal personality 394

24 November CTF Annual Roundtable, Q.7

Delaware and Florida LLPs and LLLPs likely are corporations/LLCs generally are corporations

CRA was "heavily leaning" towards characterizing Florida limited liability partnerships (LLPs) and Florida limited liability limited partnerships (LLLPs) as corporations, and was a few weeks away from reaching a definitive conclusion on this point. Its preliminary view was that the equivalents under Delaware law also are corporations.

Anson has not changed CRA's view that an LLC (at least under the statutes CRA has examined) is a corporation for purposes of the Act.

20 August 2015 External T.I. 2015-0581681E5 F - Non-resident trust rules

Liechtenstein Foundation a trust

CRA affirmed its position that a Liechtenstein Foundation "generally will be considered to be a trust for purposes of the Act." See summary under s. 94(1) - connected contributor.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Connected Contributor Liechtenstein Foundation with Canadian-resident beneficiary not subject to s. 94(3) 343

[U.K] Revenue and Customs Brief 15 (2015): HMRC response to the Supreme Court decision in George Anson v HMRC (2015) UKSC 44 25 September 2015

Anson specific to its facts

…[T]he [Anson] decision is specific to the facts found in the case. This means that where US LLCs have been treated as companies within a group structure HMRC will continue to treat the US LLCs as companies, and where a US LLC has itself been treated as carrying on a trade or business, HMRC will continue to treat the US LLC as carrying on a trade or business.

[It is understood from a U.K. correspondent that the "treating" is by HMRC, who have long regarded US LLCs as "opaque" (see INTM180030 below) and are effectively saying they will continue to do so.]

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 24 Anson specific to its facts 112

INTM180030 - "Foreign entity classification for UK tax purposes: List of Classifications of Foreign Entities for UK tax purposes"

Country-by-country listing of entities as transparent or opaque for U.K. income tax purposes.

28 May 2015 IFA Roundtable Q. 3, 2015-0581511C6 - IFA 2015 Q.3: Entity Classification

Florida LLLPs potentially corporations

CRA indicated that Florida limited liability limited partnerships and limited liability partnerships potentially may be corporations for purposes of the Act given that "they seem to have both legal personality and full, or at least very extensive, limited liability for all members," i.e., liability protection which "seems to go beyond the type of limitation of liability applicable to partnerships governed by the laws of the Canadian provinces," and invited submissions on this issue.

CRA also noted (before release of Anson) that it accepts that LLC are corporations. See summary under s. 96.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 status of LLLPs as partnerships or corporations 402

30 October 2012 Ontario CTF Roundtable, 2012-0463021C6 - Directorate policy - entity classification

entity classification rulings: resumed

[The] Directorate has reconsidered its 2010 decision [to cease giving entity classification rulings]....Taxpayers wishing to request an advance income tax ruling on...classification...should include with their request a complete description of the characteristics of the entity, their analysis as to its proper classification, and a translated copy of both the legislation under which the entity was created and its organizational documents.

5 October 2012 Roundtable, 2012-0451261C6 F - Foreign entity classification

listing of most important criteria for foreign entity classification/separate legal personality not determinative

What criteria does CRA apply characterizing a foreign entity, that has issued a security held by a Canadian resident, as a corporation, trust, partnership, or other entity? After summarizing it two-step approach to entity classification, CRA stated:

The CRA has not established a list of essential features that a foreign Entity must possess to be classified in any of the different categories of recognized Entities … . However, the most important attributes appear to us to be the nature of the relationship between the parties and the rights and obligations of the parties arising under the foreign law and relevant legal documents. This could include the nature of the rights to the assets of the Entity, the right to participate in the profits or receive distributions, the right to vote or participate in the decisions of the Entity, the right to share in the distributions of assets during the liquidation of the Entity as well as the obligations of the various parties involved. Status as a separate legal entity appears to us to be a distinctive but not exclusive feature of corporations.

15 July 2011 Internal T.I. 2010-0388621I7 - Entity Classification - Liechtenstein Anstalt

anstalt a corp

a Liechtenstein anstalt possessed most of the hallmarks of a corporation aside from issuing shares, and was to be treated as a corporation. Furthermore, although it did not issue shares within the meaning of s. 248(1), as there was only one beneficiary, a division of the capital of the anstalt into shares was unnecessary so that it was reasonable to consider that the Canadian resident beneficiary's interest was the equivalent of a share. "For Canadian tax purposes, it should suffice that the interest is what accords him the same rights as are normally conveyed by a share."

14 April 2010 Internal T.I. 2009-0347511I7 F - Partie I.3 - Société de personnes

Quebec government is a corporation

CRA found that in light of the definition of corporation in the French version of the Act and that the Quebec government was a legal person, the Quebec government was a corporation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 181.2 - Subsection 181.2(3) - Paragraph 181.2(3)(g) s. 181.2(3)(g) was to be applied on basis that partnership interest and debt held by a Crown agent was held by the Quebec government, being a corporation 158

28 September 2009 Internal T.I. 2008-0300511I7 - Classification of a foreign entity - Anstalt

anstalt a corp

In light of its characteristics, a Liechtenstein anstalt could be treated for Canadian purposes as either a trust or a corporation depending on the specific facts of the particular situation. However, CRA would not change its published position that an anstalt is a corporation without a public announcement to that effect which would only have prospective effect.

Income Tax Technical News, No. 38, 22 September 2008 under "Foreign Entity Classification"

discussion of CRA's two-step approach to entity classification (determine its characteristics under the foreign law; and compare those characteristics with those of a recognized category of business association under Canadian law).

14 August 2008 External T.I. 2004-0104691E5 - Conversion of a LLC to a LP

Del. LP a partnership notwithstanding separate legal personality

Application of CRA's two-step approach to entity classification resulted in a finding that a Delaware LLC governed by the Delaware Limited Liability Company Act that is converted into a limited partnership pursuant to s. 17-217 of the Limited Partnership Act will be considered to have become a partnership for Canadian income tax purposes, so that there is a disposition of the property of the LLC and of the shares in the LLC. CRA stated:

With regard to the classification of a DLP, it has been the CRA's long-standing position that, notwithstanding subsection 17-201(b) of the LPA which provides that a limited partnership is a separate legal entity, an entity formed under the DRUPA (Title 6, Subtitle II, Chapter 15 of the Delaware Code) or the LPA closely resembles a Canadian partnership under Canadian common law, with the effect that an entity governed by the DRUPA or the LPA would be treated as a partnership for Canadian income tax purposes.

5 October 2004 External T.I. 2004-0061861E5 - Status of a Malagasy SARL

Madagascar LLC

A limited liability company organized in Madagascar would be considered to be a corporation for purposes of the Act given that it has several characteristics of a corporation, including separate legal personality.

27 March 2008 External T.I. 2006-0200451E5 F - Syndicat de copropriétaires

condominium syndicate described in CCQ Art. 1039 is a corporation

Under article 1039 of the Civil Code, a community of co-owners of an immovable held in divided co-ownership constitutes a legal person, called a syndicate. CRA found that such a syndicate constituted a corporation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(l) distribution of land by Quebec condominium syndicate would cause it to lose its NPO status 65
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) the co-owners of a Quebec syndicate were to be viewed as members of a corporation, so that s. 15(1) applied to a distribution to them 83

9 September 2002 Internal T.I. 2002-0143957 - Liechtenstein Establ.- whether corporation

anstalt a corp

A Leichtenstein establishment (i.e., a Leichtenstein anstalt) is a corporation for purposes of the Act.

29 January 2002 External T.I. 2001-0085845 - Limited Liability Company

List of states for which CCRA has provided an opinion that a limited liability company formed under the laws of that state is a corporation for Canadian tax purposes.

10 February 1999 External T.I. 9829875 - WHETHER HUNGARIAN KFT IS A CORPORATION

A Hungarian korlatolt feleossegu tarsasag is a corporation for purposes of the Act because it has legal personality and existence apart from its members. "This would be our view whether or not the Articles of Association of the particular Kft provided that members may be liable for losses of the Kft in excess of their initial capital contributions."

24 September 1997 External T.I. 9642195 - TENNESSEE LLC (CORPORATE STATUS?)

A Tennessee limited liability company is a corporation for purposes of the Act.

28 January 1997 External T.I. 9625015 - JOINT STOCK COMPANIES IN RUSSIA

A Russian joint stock company would be a corporation for purposes of the Act (including the foreign affiliate definition), as it is a distinct legal entity, separate from its shareholders, directors and officers.


Kazackhstan Limited Liability Partnerships normally will be considered to be corporations given that they have the status of a legal entity under Kazackh Law, their property belongs to them and the participants are not held liable for the partnership's obligations - although it is possible for a particular partnership to possess certain important attributes which are not indicative of a corporate entity, for example, being formed for only a very brief period of time.


The fact that a private company with limited liability incorporated under, and governed by the Netherlands Civil Code may not have an unlimited life or that the shareholders have agreed to assume liability for its liabilities, does not generally affect the determination that it qualifies as a corporation.

13 July 1995 External T.I. 9518095 - 6363-1 FOREIGN AFFILIATES - DEF'N OF CORPORATION

RC stated on the basis of its review of the New York Limited Liability Company Law that it was of the opinion "that a company formed under the NYLLCL would be a corporation for the purposes of the Act notwithstanding that all of its members are liable in their capacity as members for all its debts, obligations or liabilities as a result of a statement to such effect in the articles of organization thereof."

25 October 1994 External T.I. 9419255 - PARTNERSHIP OR CORPORATION

A German offene Handelsgesellschaft ("OHG"), as described by the writer, would be considered a partnership for Canadian tax purposes.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 21

25 October 1994 External T.I. 9417505 - LIMITED LIABILITY COMPANY (HAA 4093-U5-100-4)

A limited liability company organized under the applicable legislation of Florida, Wyoming, Delaware or Indiana will be considered to be a corporation rather than a partnership for Canadian tax purposes.

27 June 1994 External T.I. 9406005 - CORPORATE STATUS OF A DELAWARE LLC (4093-U5-100-4)

A limited liability company formed under Chapter 18, Subtitle II of Title 6 of the laws of Delaware will be treated as a corporation for purposes of the Act.

27 June 1994 External T.I. 9408195 - CORPORATE STATUS OF A NOVA SCOTIA CO. (HAA 6363-1)

An unlimited liability company incorporated under the Nova Scotia Companies Act is a corporation within the meaning of s. 248 of the Act.

17 February 1994 External T.I. 9327905 F - Barbadian Limited Liability Company (Barbados Treaty)

Assuming that the proposed Barbadian Societies Restricted Liability Act is enacted in its proposed form, a foreign entity created under that legislation should qualify as a corporation for purposes of the Act.

93 C.M.TC - Q. 12

The limited liability companies for the two states that RC has reviewed (Wyoming and Florida) are considered to be corporations rather than partnerships.

4 October 1990 T.I. (Tax Window, Prelim. No. 1, p. 20, ¶1022)

A foreign unlimited liability company is a "corporation" and therefore may qualify as a foreign affiliate.

IT-343R "Meaning of the Term Corporation"


Angelo Discepola, Robert Nearing, "A Reply to the CRA's Classification of Florida and Delaware LLLPs and LLPs as Corporations", 2016 Conference Report (Canadian Tax Foundation), 24:1-39

First Cdn application of two-step approach to entity classification (pp. 24:2-3)

The earliest decision to apply the two-step approach in Canadian tax jurisprudence is Economics Laboratory (Canada) Ltd. v. MNR, [fn 6: 70 DTC 1208 …]…

[R]oland St-Onge QC compared the legal status of a GmbH under German law with the legal status of a corporation under Canadian law. Having reviewed the two regimes, he concluded that the two forms of arrangement were sufficiently similar to support the characterization of a GmbH as a corporation for Canadian tax purposes.

Michael N. Kandev, Sandra Slaats, "Recent Developments in the Foreign Affiliate Area", 2015 Annual CTF Conference paper

CRA position on partnerships under the Delaware Revised Uniform Partnership Act (p. 31:5)

Effectively, the CRA concluded [in ITTN No. 20, June 14, 2001, see also 2004-0104691E5] that the existence of a separate-legal-entity clause in Delaware partnership legislation would not, in itself, prevent a business association from being considered a partnership for Canadian tax purposes. However, subsequent comments by the CRA indicated that it still considers the proper characterization of partnerships formed under DRUPA to be an open question. [f.n. 23: … 2006-021645117] Effectively taxpayers have since been faced with a "don’t ask, don’t tell" situation.

Anson result not applicable in Canada (p. 31:7)

In any event, the same issue would not have arisen in Canada. The Act treats LLCs as corporations: an LLC is an "incorporated company," and as such it is explicitly included in the meaning of "corporation" as defined at subsection 248(1). Other provisions, such as article IV(6) of the Canada-US tax treaty and new section 93.2 and regulation 5907 (11.2)(b) of the Act, also contemplate that an LLC would have corporate status. Also, Canadian courts have accepted that both the CRA and taxpayers treat LLCs as corporations. [f.n. 31: TD Securities (USA) Llc v. The Queen, 2010 TCC 186; and Exida.Com Limited Liability Company v. Canada, 2010 FCA 159.] Finally, and perhaps of greatest practical relevance, is the fact that if Mr. Anson had been a Canadian resident (and assuming that the payment of US taxes and the making of distributions had been effectively timed), the credit issue would not arise in Canada because section 126 of the Act requires not that the foreign tax relate to any particular foreign-source income, but only that income and tax be sourced in the same foreign country.

Nathan Boidman, Peter Glicklich, Michael Kandev, "Canada's New Approach to U.S. LLPs and LLLPs", Tax Management International Journal, 2016, p.479

Disposition on conversion of LLP or LLP into a limited partnership (LP) or general partnership (GP) (p.480)

If CRA is correct that an LLP or LLLP has always been a corporation for Canadian tax purposes, then, as a matter of law, it would appear that a conversion of an LLP or LLLP into either a GP or LP would entail, a priori, some deemed dispositions, including the establishment of a GP or LP, a transfer of the shares of the corporation by the shareholders to the GP or LP in exchange for interests in the GP or LP, and a liquidation of the corporation. For those deemed dispositions, there may not be "roll-over" treatment available to defer or avoid immediate Canadian tax; such impacts must now be carefully considered.

Observation: From the U.S. tax perspective, such a conversion (from a domestic LLP or LLLP into a GP or LP) should be accorded non-recognition treatment. See IRS Rev. Rul. 84-52.

Treatment of an inbound LLP (p. 480-481)

[A]n LLP/LLLP that is treated as a corporation in Canada and has no PE will be exempt from Canadian tax…

On the other hand, if there have been or will be such operations of the LLP through a PE, there would be a filing requirement by only the LLP (rather than by its partners) and it would be subject to Canadian corporate taxes….

Observation: Would the United States permit the partners of an LLP or LLLP the same type and scope of foreign tax credit for the Canadian corporate taxes paid that would be allowed were the LLP treated as a partnership in Canada and each U.S. partner paid its own Canadian tax? The answer should be "yes."

Treatment of outbound LLP (p. 481)

If, however, the LLP/LLLP is treated as a resident of the United States from a Canadian tax perspective, which seems more likely, the entity will be treated as a non-resident corporation. The Canadian tax effects will turn on whether a Canadian partner has (alone or together with related parties) 10% or more of any class of the partnership interests [fn 29: …2012-2440101E5.] and, if so, whether the LLP/LLLP is controlled by certain combinations of Canadians. Depending upon the answers to these questions, the nature and scope of the U.S. activities, and whether or not the Canadian partner is a corporation, the results could range from the Canadian partner never paying Canadian tax on the U.S. earnings, to the Canadian partner paying tax only upon a distribution to the Canadian partner, to the Canadian partner paying tax immediately on income of the LLP/LLLP, even if it is not distributed currently. [fn 30: See, generally, ITA §§90-95, 113; and Part 5900 of the…Regulations… .]

Observation: From the U.S. tax standpoint, Canadian partners of the LLP/LLLP should not generally have access to Treaty benefits for income (e.g., U.S.-source dividends) earned through the LLP/LLLP. An open question is whether Article IV(7)(a) blocks the application of X(6) and results in a Code 30% branch profits tax.

Joel Nitikman, "Is an LLP a Corporation for Canadian Tax Purposes? A Reply to the CRA", Tax Topics (Wolters Kluwer), No. 2313, July 7, 2016, p.1.

Conclusion that an LLLP or LLP is a partnership for ITA purposes given that has the following hallmarks of partnership:

(a) it has at least two members;

(b) its members are carrying on business with a view to profit; and

(c) there is in force a contractual agreement, express or implied, in writing orally, or by conduct, between or among its members to carry on the business with a view to profit.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 345

Nathan Boidman, "Anson and U.S. LLCs: A Canadian Perspective", Tax Notes International, August 3, 2015, p. 439.

Effect of Anson on fiscally opaque status of LLCs (p. 439)

[T]he consistent treatment of LLCs in Canada as corporations (i.e., opaque) [raises] the obvious question as to whether Anson will disturb that status quo.

The short answer appears to be — no….

Misinterpretation of effect of LLC Agreement (p. 439)

First, with respect, the decision — that section 4.2 of the LLC agreement (together with certain provisions of the Delaware LLC Act) that required that profits be allocated to LLC owner capital accounts immediately vested those profits in the owners — seems to be wrong. This is because the judgment did not deny that the assets garnered by the LLC from those profits remained those of the LLC, to the entire exclusion of the owners, until actually distributed (and that the LLC was in no way acting as an agent or trustee with respect to those assets) and because of the interrelated fact that nowhere did the judgment consider or discuss that because no owner of an LLC is liable for its debts, creditor claims could interrupt the owner's ultimate access to those assets, underlying the profits.

No double taxation of distributed LLC profits (p. 439)

In Anson, it certainly wouldn't have been fair for the U.K. resident to suffer double tax…[H]ad Anson been a Canadian resident, the same issue would not have arisen assuming distributions in the year of LLC earnings because Canada's foreign tax credit rules do not require that the foreign tax be on the foreign income taxed in Canada, only that the same country be involved for both.

Courts and Finance implicitly have endorsed opaque status (pp. 439-440)

Third, as seen in TD Securities LLC, not only has the Canada Revenue Agency and the tax community consistently treated LLCs as corporations, the income of which is their own, but the courts have not sought to disturb that understanding.

Fourth and finally, the Department of Finance, which drafts Canada's tax laws for Parliament's consideration, has clearly endorsed the notion that U.S. LLCs are to be treated as corporations, the income of which is their own….[T]he department issues [Explanatory Notes] with new legislation, and the courts have increasingly been looking to those notes in deciding tax cases.

Matias Milet, "Hybrid Foreign Entities, Uncertain Domestic Categories: Treaty Interpretation Beyond Familiar Boundaries", 2011 Canadian Tax Journal, Vol 59, p. 25

Wittgenstein family resemblance approach

When categorizing foreign entities so as to apply the relevant entity-based Canadian rules, it likely is preferable to utilize the Wittgenstein approach of identifying "family resemblances" rather than attempting to determine the "essential" or "fundamental" characteristics that all such entities (e.g., corporations or partnerships) share in common. Includes discussion of cases categorizing German silent partnership (Memec) or LLCs.

Gwendolyn Watson, Steven Baum, "U.S. LLCs as Corporations - a New Canada Revenue Agency Position?", International Tax Planning, 2011, p. 1136

Contrary to a CRA suggestion "there does not appear to be any Canadian authority requiring that a foreign entity 'issue capital stock' in order to be considered a 'corporation'...."

Jessica Fabbro, "What is an LLC?", CCH Tax Topics, No. 2067, 20 October 2011, p.1

Discussion of HMRC v. Anson, [2011] UKUT B21 (TCC) (reversing the finding in Swift v. HMRCI, [2010] UKFTT 88 (TC) that a US LLC was closer to a Scottish partnership than a UK company).

Jessica Fabbro, "Oh Say Can You (LL)C? A Case Comment on Boliden Westmin Ltd. v. British Columbia", CCH Tax Topics, No. 1836, 17 May 2007, p. 1: discussion of finding in that case that a Nevada LLC most closely resembled a corporation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 0

Marc Damo, "Characterization of Foreign Business Associations", 2005 Canadian Tax Journal, No. 2

Proposed a two-stage approach to entity classification which now is accepted by CRA (see, for example, 2010-0388621I7.)

John R. Owen, "Foreign Entity Classification and the Character of Foreign Distributions", 2005 Conference Report, c. 20

Discussion of the essential characteristics of a corporation.

Andersen, Wilkie, "U.S. and Third-Country Limited Liability Companies Provide Opportunities for Canadian Multinationals", Tax Management International Journal, Vol. 25, No. 5, 10 May 1996, p. 291.

Hirsch, "Real Estate Issues: Traps and Opportunities", 1995 Corporate Management Tax Conference Report, c. 9

Discussion of use of Nova Scotia unlimited liability companies for real estate investments in Canada, and of U.S. limited liability companies for real estate investments in the United States.

Owen, "Using a Limited Liability Company to License Intellectual Property into the United States", Taxation Law Section Newsletter, Canadian Bar Association - Ontario, Vol. 5, No. 3, May 1995, p.1.

Bernstein, "U.S. Limited Liability Corporations", Tax Profile, February 1995, Vol. 4, No. 20., pp. 201, 205.

Lanthier, "Emerging Income Tax Issues: Public Service 2,000, International Finance Companies, and U.S. Limited Liability Companies", 1993 Conference Report, pp. 3:19 - 29

Discussion of U.S. limited liability companies.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 113 - Subsection 113(1) 7