Subsection 217.1(1)
Administrative Policy
Bulletin B-095 June 2011 "The Self-assessment Provisions of Section 218.01 and Subsection 218.1(1.2) for Financial Institutions (Import Rules)"
Non-resident trust (majority Cdn-owned) with Cdn activity and no Cdn PE
Example 5
A non-resident mutual fund trust has a non-resident trustee. The majority of the persons having beneficial ownership of the property of the trust are resident in Canada. The non-resident trust is carrying on activities in Canada, but does not have a permanent establishment in Canada (as defined in subsections 123(1) or 132.1(2)). The non-resident trust is a qualifying taxpayer because the non-resident trust is a FI carrying on activities in Canada and the majority of the trust beneficiaries are resident in Canada.
Articles
Alan Kenigsberg, "Changes to Tax Treatment of ILPs under the ETA", Sales Tax, Customs & Trade, Volume XV, No 2, Federated Press, 2018, p.9
Aborted proposal to extend qualifying taxpayer rules to non-resident LPs (p. 12)
When the Department of Finance first announced that it was looking into drafting new rules for ILPs and requested comments, it suggested that the self-assessing rules may be extended to limited partnerships where the value of the assets of the partnership in which one or more persons resident in Canada have a beneficial interest, is equal to or exceeds $10 million and is equal to or exceeds 10% of the total value of the assets of the partnership. Thankfully, the Department of Finance appears to have dropped this proposal (presumably, at least in part, as it would likely result in some non-resident funds forbidding Canadian investors from investing so they would not be caught by the rules) and the Proposed Legislation does not contain any rules extending the self-assessment requirements in subsection 217.1(1) of the Excise Tax Act to non-resident ILPs (even those with Canadian residents holding significant beneficial interests).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Investment Limited Partnership | 259 | |
| Tax Topics - Excise Tax Act - Section 272.1 - Subsection 272.1(8) | 52 |
Paragraph 217.1(1)(b)
Administrative Policy
Bulletin B-095 June 2011 "The Self-assessment Provisions of Section 218.01 and Subsection 218.1(1.2) for Financial Institutions (Import Rules)"
Ss. 132(2) and (3) rules do not apply for purposes of s. 217.1(1)(b)(i)
Qualifying taxpayer
…
The reference to being resident in Canada in the definition of "qualifying taxpayer" does not include a non-resident with a permanent establishment under subsection 123(1) in Canada where that person is deemed under subsection 132(2) to be resident in Canada with respect to activities of the person carried on through the establishment. For example, a foreign corporation with a branch that is a permanent establishment under subsection 123(1) located in Canada is not a resident of Canada but is considered a non-resident with a permanent establishment in Canada.
Similarly, a non-resident does not include a resident with a permanent establishment under subsection 123(1) in a country other than Canada where that person is deemed under subsection 132(3) to be a non-resident in respect of activities of the person carried on through that establishment. For example, a corporation resident in Canada with a branch that is a permanent establishment under subsection 123(1) located in another country is not considered to be a non-resident.
Subsection 217.1(4)
Administrative Policy
Bulletin B-095 June 2011 "The Self-assessment Provisions of Section 218.01 and Subsection 218.1(1.2) for Financial Institutions (Import Rules)"
Example of internal charge
A qualifying taxpayer resident in Canada has made an election under subsection 217.2(1) to self‑assess on the total of its internal charges and external charges for a specified year. An amount is allocated by the qualifying taxpayer to its head office located in Canada for research services performed in the U.S. by the U.S. branch for use by the head office in Canada. The amount is deducted by the qualifying taxpayer in computing the income of the head office under the ITA and therefore meets the requirements of subparagraph 217.1(4)(a)(i). The amount is also required by the qualifying taxpayer to be included as income under the taxing statutes of the U.S. in computing the income of the U.S. branch and meets the requirements of subparagraph 217.1(4)(a)(ii). Since no part of the amount was accounted for under an external charge, no part was a permitted deduction, and the amount was not with respect to derivatives, the exclusions in paragraph 217.1(4)(b) do not apply. As a result, the whole amount allocated to the Canadian head office is an internal charge under paragraph 217.1(4)(a) and is subject to self‑assessment.