Principal Issues: When can a taxpayer make a relevant cost base election in respect of its foreign affiliate?
Position: See below
XXXXXXXXXX 2009-033132 Shelley Helmer LL.B. (613) 957-2118
February 24, 2012
Dear XXXXXXXXXX :
Re: Relevant Cost Base Election
This is in response to your email dated June 17, 2009 wherein you inquired as to how long after the taxpayer's filing due date CRA would accept a relevant cost base election. You further inquired whether the relevant cost base election could be filed with a late filed 93(1) election. We apologize for the delay.
As you are aware, on August 19, 2011 the Department of Finance released Legislative Proposals in Respect of Foreign Affiliates (the "Proposals".) The Proposals include an amended definition for relevant cost base in subsection 95(4) and a new regulation, subsection 5911(3) of the Income Tax Regulations (the "Regulations"), that addresses your question.
The proposed definition of relevant cost base in subsection 95(4) of the Act applies to any determination in respect of the property of a foreign affiliate made after February 27, 2004. However, in certain circumstances if the taxpayer has elected to have the proposed definition apply, the proposed definition of relevant cost base may apply to such elections after December 20, 2002 and before Feb 28, 2004. There are also certain transitional rules.
Proposed subsection 5911(3) provides:
An election under the definition "relevant cost base" is subsection 95(4) of the Act in respect of a property of a foreign affiliate of a taxpayer, in respect of the taxpayer, is to be made by the taxpayer by so notifying the Minister in writing on or before
(a) if the taxpayer is a partnership, the earliest of the filing-due dates of any member of the partnership for the member's taxation year that includes the last day of the partnership's fiscal period that includes the last day of the foreign affiliate's taxation year in which the determination of the relevant cost base of the property, in respect of the taxpayer is relevant; and
(b) in any other case, the taxpayer's filing-due date for its taxation year that includes the last day of the foreign affiliate's taxation year in which the determination of the relevant cost base of the property, in respect of the taxpayer is relevant.
The proposed coming into force provision that accompanies proposed subsection 5911(3) of the Regulations provides that any election in respect of the property of a foreign affiliate that would otherwise be required to be filed before the day that is 120 days after the day on which the Proposals are assented to is deemed to be have been filed with the Minister on a timely basis if it is filed with the Minister within 365 days after the day on which the Proposals are assented to.
We trust these comments are of assistance.
Yours truly,
Olli Laurikainen C.A.
Manager
International and Trust Division
Income Tax Rulings Directorate