Words and Phrases - "substantially all"

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2 November 2023 APFF Roundtable Q. 3, 2023-0984441C6 F - Qualified small business corporation share - meaning of "all or substantially all" and "asset"

a momentary right to discharge a dividend payable constitutes a non-active business asset for QSBCS purposes/ no rigid equating of "substantially all" with 90%

An individual holds the common shares of Holdco having an FMV of $1 million, and Holdco’s only asset is the common shares of Opco, also with an FMV of $1 million. $700,000 of Opco’s assets are used principally in its active business carried on primarily in Canada and $300,000 are excess cash. Stopping there, the para. (d) rule in the qualified small business corporation share (QSBCS) definition would not be engaged because 100% of Holdco’s assets were qualified assets, being shares of Opco which satisfied the 50% asset test in para. (b).

Suppose, however, that, under a “purification” transaction, Opco pays a cash dividend of $150,000 to Holdco, which immediately pays a dividend in the same amount to the individual. At the instant in time in which Holdco held such cash, more than 10% of its assets would not be the qualifying assets listed in para. (d), which would apparently mean that Opco at the relevant times would now be required to satisfy a 90% rather than 50% asset test, which would not be met because its excess cash assets were $150,000/$850,000, or 18%. However, the QSBC test would be met if the dividend was greater than $230,000 or less than $100,000.

(a) Would such holding of the $150,000 in cash by Holdco for an instant in time “contaminate” it and require a fresh 24-month period to restart?

(b) If instead Holdco declared and paid a $150,000 dividend, payable to its shareholder by a note, and Opco declared a dividend payable through discharging the note, with no new asset thereby being recorded on Holdco's balance sheet, would the result be the same?

(a) CRA noted that it “recognize[d] that the ‘all or substantially all’ test could be met even if the 90% threshold is not satisfied, depending on the circumstances and context” and further noted that if one of “the asset tests described in the definition of QSBCS in subsection 110.6(1) (more than 50% or all or substantially all) must be satisfied at all times during the relevant period …. is not met during the relevant period, even for a short period, a share of the capital stock of a corporation will not qualify as a QSBCS.”

(b) CRA stated:

Holdco has an interest in the dividend declared by Opco and … the interest in such a dividend is an "asset" for the purposes of the definition of QSBCS, regardless of whether it is recorded on the corporation's balance sheet. In particular, Holdco benefits from the dividend declared by Opco even if the amount of the dividend does not pass through Holdco because it allows Holdco to have its liabilities reduced following the payment made by Opco.

Words and Phrases
asset substantially all

Ressources Eastmain Inc. v. Agence du revenu du Québec, 2021 QCCQ 4379

as a junior exploration company’s CEO devoted "substantially all" (75%) of his time to exploration, his salary was not CEDOE

The taxpayer was a micro-cap junior exploration company devoted to two projects in northern Quebec. For the four taxation years in issue (2007 to 2010), it claimed between 49% and 71% of the remuneration of its president and CEO (“Robinson”) as Canadian exploration expense that was eligible for Quebec exploration credits. The correctness of this claim turned principally on whether under paragraph (b) of the definition of “Canadian exploration and development overhead expense” (contained in s. 360R2 of the Quebec regulations, and essentially the same as the corresponding federal definition in Reg. 1206(1)) his remuneration was not “in respect of a person employed by the taxpayer whose duties were not all or substantially all related to exploration or development activities.”

Fournier JCQ accepted (at paras. 250, 269) that Robinson devoted approximately 75% of his time to exploration activities, and only the balance of his time to such matters as investor relations and attending board meetings. After reviewing the jurisprudence on “all or substantially all,” he stated (at paras. 239-240, TaxInterpretations translation):

This review of the case law thus allows us to conclude that the expression "substantially all" does not lend itself to the use of a simple mathematical formula and should not be interpreted as corresponding to a given proportion of a whole established in an arbitrary manner.

On the contrary, the phrase is somewhat "elastic" and the meaning to be given to it must take into account the circumstances and context in which it is applied.

Accordingly, the claimed salary amounts qualified for the credits. The balance of his salary was not so eligible because it had not been claimed on a timely basis in the prescribed form.

Words and Phrases
substantially all
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Current expense vs. capital acquisition annual expenditures on core sample boxes and racks were capital expenditures, whereas those on dirt berms were currently deductible 302
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (k.1) annual expenditures on core sample boxes and racks were excluded under para. (k.1) 105
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (f) geology course for an employee was necessary to exploration and resource identification 173

13 June 2007 External T.I. 2007-0226261E5 F - Convention Émirats Arabes Unis

meaning of “substantially all” in UAE Convention informed by its meaning under ITA

Canco incorporated a wholly-owned subsidiary in Dubai, in the United Arab Emirates (Dubai Co), whose management and control, and the sole establishment of its business will be in Dubai. Art. 4(1)(b)(ii) of the Canada UAE Convention, defined a resident of the UAE to include a company incorporated there where “all or substantially all of the company’s income is derived by the company from the active conduct of a trade or business, other than an investment business, in the United Arab Emirates and all or substantially all of the value of the company’s property is attributable to property used in that trade or business.” CRA stated:

The terms "all or substantially all" and "active conduct of a trade or business" are not defined in the CAN-UAE Convention. As stated in Article 3(2) of the CAN-UAE Convention: “As regards the application of the Convention by a Contracting State at any time, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies.” In the light of the foregoing, expressions not defined for the purposes of the CAN-UAE Convention shall, unless the context otherwise requires, have the meaning which they have for the purposes of the Act.

The CRA's administrative position is that the "all or substantially all" test is usually considered to be satisfied where a level of 90% or more is reached. However, the "all or substantially all" test could, depending on the circumstances and context, be satisfied even if the 90% level is not strictly met.

Words and Phrases
substantially all
Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 3 undefined term in Convention informed by its domestic interpretation by CRA 36
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(a) FA required to have its central management and control in the Treaty country in addition to satisfying the Treaty residence test 251

Atlantic Packaging Products Ltd. v. Canada, 2020 FCA 75

transfer of assets representing 68% of the FMV of the assets of a business division did not satisfy the “substantially all” test

The taxpayer, a paper products manufacturer, engaged in a hybrid transaction in which it sold some of the assets of its “Tissue Division” directly to a third-party purchaser (“Cascades”) and rolled the balance of them down to a Newco under s. 85(1) for Newco shares and sold the Newco shares to Cascades. CRA assessed on the basis that the sale of the Newco shares was on income account. The Tax Court found that the transferred assets represented about 68% of the fair market value of the assets of the Tissue Division – and perhaps significantly less, given that some of the Tissue Division assets had not been valued. Accordingly, the requirement of s. 54.2 - that all or substantially all of the assets of the business have been transferred to a corporation – had not been met, so that s. 54.2 did not deem the gain on the share sale to be a capital gain.

In dismissing the taxpayer’s appeal, Webb JA stated (at para. 41):

I agree with the Tax Court Judge that conveying 68% of the assets used in the Tissue Division to 722 would not satisfy the requirement that all or substantially all of the assets of the Tissue Division be conveyed to 722. Therefore, it is not necessary to revise the calculation to include an amount for these [other] assets.

Words and Phrases
substantially all
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Machinery and Equipment the number and frequency of similar dispositions of depreciable property was relevant to capital account treatment 341
Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 27 - Subsection 27(1.3) raising of new issue would prejudice the Crown 222

Frequently asked questions - Canada emergency wage subsidy (CEWS) CRA Webpage 24 September 2021

Examples of application of the special elective rule to use the qualifying revenues of NAL persons to determine reduction in qualifying revenues

8. Are there special rules for calculating the qualifying revenue of an eligible employer that derives its revenue from one or more non-arm's length persons or partnerships?

Example re provision to non-arm's length domestic corporation

Example 8A

Corporation A, an eligible employer, provides management services, including payroll services, to Corporation B. All of Corporation A's revenues are from Corporation B with which it does not deal at arm's length. Corporation B's revenues are from arm's-length customers.

Under the special rule, in order to determine whether Corporation A can qualify for the wage subsidy, Corporation A's qualifying revenue for the current reference period is determined by reference to the required reduction in qualifying revenue for Corporation B for that reference period.

Example re provision to 2 non-arm's length domestic corporations

Example 8B

All or substantially all of the revenues of Corporation X, (an eligible employer), are from two corporations (Corporation Y and Corporation Z) with which it does not deal at arm's length.

Corporation X's total revenue for March 2020 was $1,450 of which $400 was attributable to Corporation Y and $1,000 was attributable to Corporation Z. $50 was from an arm's-length taxpayer.

Corporation Y's qualifying revenue for March 2020 was $1,000 and for March 2019 was $1,500.

Corporation Z's qualifying revenue for March 2020 was $1,300 and for March 2019 was $2,000.

Calculation of Corporation X's qualifying revenue for the current reference period:

Qualifying revenue (QR) calculation in relation to Corporation Y:

$100 x $400 (QR attributable to Corporation Y)/$1,400 (Corporation X's total QR from non-arm's-length persons or partnerships) x $1,000(Corporation Y QR for current reference period)/$1,500 (Corporation Y QR for prior reference period) = 19

QR calculation in relation to Corporation Z:

$100 x $1,000 (QR attributable to Corporation Z)/$1,400 (Corporation X's total QR from non-arm's-length persons or partnerships) x $1,300(Corporation Z's QR for current reference period)/$2,000 (Corporation Z's QR for prior reference period) = 46

The weighted average qualifying revenue for Corporation X for the current reference period is $65 ($19+$46). Since the prior reference period's qualifying revenue is deemed to be $100, Corporation X has experienced the required reduction in revenue of at least 15% for the claim period. Corporation Y and Corporation Z must jointly elect with Corporation X in order to use this special rule.

Example of s. 125.7(4)(d) election with non-resident corporation

Example 8C

All or substantially all of the revenues of Canco, (an eligible employer), are from sales to a non-resident corporation (Forco), who then sells to arm’s length customers. Canco and Forco do not deal at arm’s length. All of Canco’s ordinary activities take place in Canada. All of Forco’s sales and other activities take place outside of Canada.

Canco’s total revenue for March 2020 was $900. All of this revenue was attributable to Forco.

Forco’s total revenue for March 2020 was $1,500 and for March 2019 was $2,000.

Calculation of Canco’s qualifying revenue for the current reference period:

Qualifying revenue (QR) calculation in relation to Forco:

$100 x $900 (QR attributable to Forco)/$900 (Canco total QR from non-arm’s-length persons or partnerships) x $1,500 (Forco QR for current reference period)/$2,000 (Forco QR for prior reference period) = 75

Since the prior reference period’s qualifying revenue is deemed to be $100, Canco has experienced the required reduction in revenue of at least 15% for the claim period. Forco must jointly elect with Canco in order to use this special rule

[Q.8-01] ...

  • Non-resident's qualifying revenue could be measured in the applicable foreign currency consistent with the non-resident’s normal accounting practice

[Q.8-1]. Meaning of “substantially all”

Generally, the phrase “all or substantially all” means at least 90%. … However, the “all or substantially all” test could, depending on the circumstances and context, be satisfied even if the 90% level is not strictly achieved.

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Words and Phrases
substantially all
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(9) - Paragraph 125.7(9)(a) 150
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Qualifying Entity - Paragraph (c) - Subparagraph (c)(ii) 236
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(4) - Paragraph 125.7(4)(a) 401
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(4) - Paragraph 125.7(4)(b) 367
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Eligible Employee 637
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Eligible Remuneration 474
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(2) - Element B 245
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Qualifying Revenue 1009
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Eligible Entity - Paragraph (f) 79
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Eligible Entity - Paragraph (a) 236
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Qualifying Entity - Paragraph (d) - Subparagraph (d)(ii) 170
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(9) - Paragraph 125.7(9)(b) 379
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(g.5) 198
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(4.1) 194
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Top-Up Percentage 333
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Base Percentage 175
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Service - Paragraph (c) 78
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Baseline Remuneration 267
Tax Topics - Income Tax Act - Section 241 - Subsection 241(3.5) 76
Tax Topics - Income Tax Act - Section 153 - Subsection 153(1) - Paragraph 153(1)(a) 141
Tax Topics - General Concepts - Agency 92
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Executive Compensation Repayment Amount 102

5 November 2010 External T.I. 2010-0383871E5 F - Crédit d'impôt pour emploi à l'étranger

could perform “substantially all” employment duties abroad if less than 10% of the time spent in Canada on preparatory work

Before employees go abroad to perform under the contract, they must work in Quebec to prepare and ship the equipment needed for the work to be performed overseas. Are they eligible for the OETC while they are still on Canadian soil and performing preparatory work under that contract? In its summary, CRA indicated, likely yes, and in the body stated:

The "all or substantially all" test is generally considered to have been met if 90% of the employment duties were performed outside Canada. … For example, if the qualifying period is 14 continuous months, and assuming that the employment duties are performed consistently over the period, the employee would not normally be expected to spend more than 1.4 months (10% of 14) in Canada performing the duties of employment that would otherwise qualify for the OETC.

Words and Phrases
substantially all

12 December 2018 External T.I. 2017-0718661E5 - Private health services plan

coverage for employee's U.S. medical expenses would qualify if they were substantially METC-type expenses

The purpose of a Blue Cross and Blue Shield insurance plan (XXXXXXXXXX Blue Cross plan is to reimburse an employee for certain medical and health care costs the employee incurs while in the U.S. CRA stated:

[A] plan is a PHSP, amongst other conditions, if ‘all or substantially all’ of the premiums paid under the plan relate to medical expenses that are eligible for the medical expense tax credit (METC). “All or substantially all” generally means 90% or more.

… Folio S1-F1-C1 … states that, notwithstanding several exceptions, “eligible medical expenses are not restricted to those paid in Canada or for medical services provided in Canada”.

Whether ‘all or substantially all’ of the premiums paid under the … plan relate to medical expenses that are eligible for the …METC … is a question of fact and can only be determined by the insurer of the plan.

Words and Phrases
substantially all
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) - Subparagraph 6(1)(a)(i) coverage for U.S. expenses of METC type generally eligible 115

Atlantic Packaging Products Ltd. Atlantic Produits D'Emballage Ltée v. The Queen, 2018 TCC 183, aff'd 2020 FCA 75

s. 54.2 did not apply to the drop-down of under 68% of the assets of a business division to a Newco for Newco shares

The taxpayer was a paper products manufacturer. One of its five divisions was its Tissue Division which focused on the manufacturing and sale of toilet paper and paper towels. In 2009, the taxpayer entered into a number of transactions designed to effect the transfer of the Tissue Division to a competitor named Cascades Canada Inc. A rollover of certain assets of the Tissue Division was made to a newly formed corporation named 7228392 Canada Inc. (“722”) pursuant to s. 85(1) in exchange for common shares of 722, which were ultimately sold to Cascades. The Tissue Division operated from three different locations, two of which, (the “Progress Property” and the “Whitby Property” where large tissue rolls were produced from recycled paper), were owned by the taxpayer and the third location, (the “Converting Property” where those rolls were converted into rolls of toilet paper and paper towels), was leased from an affiliated party. The only assets that were transferred to 722 were the Converting Mill and the remaining converting assets. All of the other assets of the Tissue Division were either sold directly to Cascades, leased to Cascades or retained by the taxpayer. The taxpayer’s leasehold interest in the Converting Property was subleased to Cascades for $1 per year.

The taxpayer reported its $29.2 million gain on the sale of the shares of 722 as a capital gain in reliance on s. 54.2. The Minister reassessed the taxpayer on the basis that the gain should have been reported on income account as the Tissue Division was not a business in itself but rather was a part of the Appellant’s overall paper products business, and in any case the taxpayer did not transfer all or substantially all of the assets used in the Tissue Division to 722. The only issue before Graham J was the applicability of s. 54.2.

Before going on to find that s. 54.2 did not apply, Graham J first noted that it was unnecessary, given his findings below, for him to address whether the Tissue Division was a separate business, and then stated (at paras 25, 27 and 28):

It is unclear on the face of section 54.2 how I am to determine whether the assets … transferred to 722 represent all or substantially all of the assets of the Tissue Division. …The test in section 54.2 can be contrasted to the definition of “small business corporation” found in subsection 248(1). That definition requires an examination of whether “all or substantially all of the fair market value of the assets” of the corporation meets certain tests. …[W]hen Parliament wants to require the use of fair market value in an “all or substantially all” test, it does so explicitly. However, …[i]t simply indicates that I am not limited to considering value.

While there does not appear to be a requirement that the recipient of the assets be able to carry on the business, the inverse is not necessarily true. It is arguable that the test in section 54.2 could be satisfied so long as the recipient had received all of the key assets of the business, regardless of their value. …

…I find that the test in section 54.2 is intended to be a somewhat flexible test but that there is no reason not to consider the fair market value of the assets when applying the test. …

Graham J found, to the extent that the test in s. 54.2 considers fair market value, the taxpayer had not met the test, stating (at paras 32, 33):

… [T]he assets transferred to 722 would make up only 68% of the total assets of the Tissue Division. While I acknowledge that all or substantially all does not mean 90% and that the specific percentage that meets the test in any given context may vary, I cannot accept that it means something just over two-thirds. …

There was no evidence as to the fair market value of the portion of the Progress Property [or] … the Whitby Property used by the Tissue Division. … Had these assets been included in the … calculation, the percentage of fair market value transferred to 722 would have been even lower.

He also rejected (at paras. 38 et seq.) on the evidence that the dropped-down assets represented “the heart of the business of the Tissue Division.”

Words and Phrases
substantially all
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a) prior filing positions contradicted position that tissue division was separate business 437

Kenny v. The Queen, 2018 TCC 2 (Informal Procedure)

foreign government assistance scuppered the “substantially all” test in s. 118.94

In 2014, the taxpayer, who was an Irish national and resident, earned $32,728.52 in employment income from working in Fort McMurray, Canada for a few weeks, and also received the euro equivalent of $23,002.37 from the Irish government, mostly as means-tested assistance. In filing his 2014 return, the taxpayer claimed credits of $28,717, whose availability turned on whether he satisfied the condition in s. 118.94 that substantially all of his income for the year was included in computing his taxable income earned in Canada for the year.

In finding that the assistance received by the taxpayer from the Irish government was “a social assistance payment made on the basis of a means, needs or income test” described in s. 56(1)(u), C Miller J noted (at para. 9) that there was no authority for the argued proposition “that because Mr. Kenny did not have to report the social assistance payments as income in Ireland, they should not be considered income for purposes of section 118.94 ,” and then stated (at para 12):

I am unable to find anything in the legislation that provides that these foreign social assistance payments do not constitute income.

After noting that, on this basis, the Canadian employment income was approximately 60% of the taxpayer’s income for 2014, he stated (at para 18-19):

… [C]ases have relied on percentages as low as 76% to be considered substantially all. In Mr. Kenny’s case, I would be stretching “substantially all” beyond any measure of elasticity if I concluded that 60% represented “substantially all”. It certainly reflects a majority but that is not the same as substantially all.

I conclude Mr. Kenny has been caught by the application of section 118.94 of the Act and is not entitled to tax credits beyond what the Minister has allowed. …

Words and Phrases
substantially all
Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 25 s. 118.94 did not violate non-discrimination-against-nationals Art. in Canada-Irish Treaty 230

11 October 2013 APFF Roundtable, 2013-0495631C6 F - Actions admissibles de petites entreprises

90% is generally a safe harbour, and in a particular context CRA may accept lower than 90%

Must the 90% level always be attained before the "substantially all" test is satisfied? CRA stated:

According to the jurisprudence, the interpretation of the term "all or substantially all" ... depends on the relevant legislative provision and the facts of each case. ...

...[T]he CRA ... usually consider[s] that the "all or substantially all" test is satisfied when a level of 90% or more is reached.

However, the test of "all or substantially all" could, depending on the circumstances and the context, be satisfied even if the 90% level is not reached. Where the 90% level is not attained, the CRA must consider each case in its particular context to determine if a threshold lower than 90% could satisfy the "all or substantially all" test.

Words and Phrases
substantially all
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share failure to satisfy the 50% test for even a moment in time will disqualify 135

Keefe v. The Queen, 2003 DTC 1526, 2003 TCC 791 (Informal Procedure)

The taxpayer, who was the principal of a family company that was engaged in the supply and installation of commercial floor coverings, used a company-supplied vehicle to service clients (often after hours) within a 100-kilometre radius of his business premises and drove the vehicle approximately 40,000 kilometres per taxation year of which 7,500 kilometres were for non-employment purpose uses. Sheridan J. found that the taxpayer had satisfied the "substantially all" test in paragraph (d) of A in s. 6(2).

Words and Phrases
substantially all

Imapro Corp. v. The Queen, 92 DTC 6487, [1992] 2 CTC 298 (FCTD)

47.3% of a multi-purpose building which was constructed for a computer graphics corporation was used exclusively by it for scientific research. The corporation was unsuccessful in deducting 47.3% of the construction costs that related to common and administrative areas that were not used solely for scientific research purposes and in the deduction of 47.3% of expenses of a current nature that related to the common areas. McGillis J. stated (p. 6494):

"Even assuming that some leeway is permitted from the 90% rule adopted by the Department ... a 47.3% portion of expenditures incurred in relation to SR&ED would not fall within the meaning of the words 'all or substantially all'."

Words and Phrases
substantially all

Benson v. Third Canadian Investment Trust Ltd. (1993), 14 OR (3d.) 493 (Ont. Ct. (G.D.))

Farley J. found that the sale pursuant to a share exchange offer for the direct and indirect shareholding of a closed-end investment company ("TCGIT") in another closed-end investment company ("CGI") that represented approximately 2/3 of the market value of the assets of TCGIT would constitute a sale of substantially all the assets of TCGIT given that the sale would radically and fundamentally alter TCGIT because the underlying assets of CGI would be managed by the acquirer under a significantly different fee arrangement, and TCGIT would lose the benefit of effective control over CGI. Accordingly, a two-thirds majority resolution of the shareholders of TCGIT was required.

Words and Phrases
substantially all

Hasbro Canada Inc. v. The Queen, 98 DTC 2129, [1999] 1 CTC 2512 (TCC)

The taxpayer, which was a Canadian manufacturer and distributer of toys in Canada, paid fixed commissions expressed as a percentage of the purchase price of products acquired by it from the Far East, to an affiliated company resident in Hong Kong. Before going on to consider ss.212(1)(d)(ii) and (iii), Dussault TCJ. noted (at p. 2136) that "a royalty or similar payment is ... one made for the use of property, rights or information whereby the payments for such use are contingent upon the extent or duration of use, profits or sales by the user", and went on to find that because the purchase commissions were essentially for services rendered, they did not so qualify.

Words and Phrases
know-how substantially all

Watts v. The Queen, 2004 DTC 3111, 2004 TCC 535 (Informal Procedure)

The taxpayer, who received approximately 80% of his income in the form of Public Service Management Insurance Plan disability payments, was found to receive "all or substantially all" of his income in such form for purposes of s. 118.94.

Words and Phrases
substantially all

Reluxicorp Inc. v. The Queen, [2011] GSTC 138, 2011 TCC 336

The registrant was a hotel company that paid franchise fees to a hotel franchise ("Marriott") in the United States. Marriott's fees were based on gross room revenues. Lamarre J. found that, because 30% of the registrant's revenue was from exempt stays (i.e. exceeding one month), 30% of the franchise fees were not incurred in respect of a "commercial activity" as defined in s. 123(1). Accordingly, she affirmed the Minister's assessment, which was made on the basis that the provision by Marriott of franchise rights was an "imported taxable supply" under s. 217, for which the registrant was liable to pay GST on the consideration paid on the basis that 30% of the franchise fees was not eligible for an input tax credit. One of the registrant's arguments was that the 30% franchise fees were not paid in respect of the long-term stays because 95% of its long-term bookings were not connected in any way with the franchise brand, and were booked through its internal management office. The court found that these numbers were closer to 75%, so it could not be said that the fees paid for the Marriott "banner" related exclusively to the short-term bookings. After noting that the meaning of "all or substantially all" must be left to the discretion of the trier of fact, Lamarre J. stated (at para. 29):

In my opinion, there is a limit to be observed. Parliament used the expression "all or substantially all," which means, in my view, that the figure must be closer to the totality than half-way between the majority and the totality.

Words and Phrases
substantially all