Principal Issues: Whether rulings issued in 2010-035314 will still be valid given additional information?
Position: Yes
Reasons: Additional information is not a material change.
XXXXXXXXXX 2010-037758 XXXXXXXXXX XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX , 2010
Dear XXXXXXXXXX :
Re: XXXXXXXXXX
Supplemental Advance Income Tax Ruling
This is in reply to your letter of XXXXXXXXXX in which you provide additional information with respect to an advance income tax ruling (document 2010-035314) issued to XXXXXXXXXX ("Canco") on XXXXXXXXXX , 2010 (the "Ruling"). All of the Definitions, Facts, Proposed Transactions, Purpose of the Proposed Transactions and Other Information in the Ruling are applicable to this letter.
As described in paragraph 12 of the Ruling, Canco will form a new corporation ("Financeco") under the laws of XXXXXXXXXX . Financeco will be formed as a XXXXXXXXXX under the relevant XXXXXXXXXX corporate law. Under that law, an XXXXXXXXXX must have at least XXXXXXXXXX shareholders. The following changes are therefore required in the Ruling:
- Add new paragraph (k.1) to the definitions as follows:
(k.1) "Holdco" means a corporation to be formed as described in 11.1 below.
- Add new paragraph 11.1 as follows:
Holdco will be formed as a XXXXXXXXXX under and governed by the laws of XXXXXXXXXX . Its taxation year end will be XXXXXXXXXX . Holdco will be resident in XXXXXXXXXX for purposes of the Act and the Canada-XXXXXXXXXX Tax Convention. The share capital of Holdco will comprise ordinary shares.
- Add new paragraph 11.2 as follows:
Canco will subscribe for ordinary shares of Holdco for a nominal amount, and Holdco will be a wholly-owned subsidiary of Canco.
- Replace paragraph 12 with the following:
Financeco will be formed as a XXXXXXXXXX under, and governed by, the laws of XXXXXXXXXX . Its taxation year end will be XXXXXXXXXX . Financeco will be resident in XXXXXXXXXX for purposes of the Act and the Canada-XXXXXXXXXX Tax Convention. The share capital of Financeco will comprise ordinary shares (unlimited and limited (footnote 1) ) and MRPS.
- Replace paragraph 13 with the following:
Financeco will issue XXXXXXXXXX ordinary shares (unlimited and limited). Holdco will subscribe for XXXXXXXXXX unlimited ordinary shares of Financeco for a nominal amount. Canco and Holdco will each subscribe for XXXXXXXXXX limited ordinary shares of Financeco for a nominal amount. The ordinary shares have one vote per share. Canco will use its cash of $XXXXXXXXXX to subscribe for MRPS.
- Replace subparagraph 14(ii) with the following:
the nominal value of the MRPS will be less than $XXXXXXXXXX , and the balance of the amount paid for the MRPS will be added to the share premium account maintained for the MRPS;
- Replace paragraph 16 with the following:
It is intended that dividends will be paid on the MRPS on an annual basis. For XXXXXXXXXX tax law purposes, the MRPS will be treated as debt rather than equity, and any dividends paid by Financeco on the MRPS will be deductible in computing the income of Financeco subject to tax in XXXXXXXXXX . Consequently, there will be no significant foreign taxes paid by Financeco and no material amount claimed by Canco as a deduction under subsection 91(4) of the Act.
Rulings Given
Subject to the conditions, limitations, qualifications and comments set out in the Ruling, we confirm that the Ruling will continue to be binding on the Canada Revenue Agency provided that the Proposed Transactions set out in the Ruling and amended by this letter are completed by XXXXXXXXXX . In addition, we rule as follows:
A.1 Holdco will be a Foreign Affiliate and a Controlled Foreign Affiliate of Canco.
Yours truly,
XXXXXXXXXX
For Director
International & Trust Division
Income Tax Rulings Directorate
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained
in the original document are shown below instead:
1 An unlimited shareholder in a XXXXXXXXXX is indefinitely and jointly and severally liable for the obligations of the company, whereas a limited shareholder's liability is limited to the contribution made. Unlimited and limited shares have the same voting rights: one vote per share. If dividends are paid on the ordinary shares, there is no distinction between the unlimited and limited shares.