Words and Phrases - "liable to tax"
19 August 2010 External T.I. 2009-0344111E5 F - Résidence Société Capital-Risque - Conv Can-France
In finding that a French venture capital corporation ("VCC"), that was resident in France for French taxation purposes by virtue of its domicile as well as its effective place of management, and that had elected to be exempt from French corporate income tax respecting current income and capital gains on the sale of securities included in its portfolio, was a resident of France for purposes of the Canada-France Income Tax Convention, CRA stated:
[A] VCC is liable to tax in France by reason of its domicile, residence, place of management or any other criterion of a similar nature, as provided for in paragraph 1(a) of Article IV of the Convention, notwithstanding the fact that it may have opted for exemption from French corporation tax. It should be noted that a VCC may still be taxed in France on its gains from the disposal of securities which have remunerated it for its contribution of ancillary activities, as well as on income realized in accordance with the company's objects but not coming from the portfolio, such as profits from the disposal of movable or immovable property, and subsidies, all as described … above.
Crown Forest Industries Ltd. v. Canada, 95 DTC 5389, [1995] 2 S.C.R. 802, [1995] 2 CTC 64
Some of the income derived from a corporation incorporated in the Bahamas was effectively connected with the conduct by it of a business in the United States. However, Norsk paid no U.S. tax on barge rental payments received by it, including barge rental payments received from the Canadian taxpayer, by virtue of the exemption for international shipping companies contained in s. 883 of the U.S. Internal Revenue Code.
Norsk was liable to U.S. tax by reason of being "engaged in a trade or business" in the U.S. rather than on the basis of having a place of management in the U.S. Furthermore, liability for income effectively connected to a business engaged in the U.S. was not a "criterion of a similar nature" to those listed in Article IV, para. 1, of the Canada-U.S. Income Tax Convention because the other criteria entailed being subject to a comprehensive tax liability on the entity's world-wide income. Accordingly, Norsk was not a U.S. resident for purposes of that convention, with the result that rentals paid by the taxpayer to Norsk were not eligible for a reduced rate of withholding tax.
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| Tax Topics - Treaties - Income Tax Conventions | 83 |