Principal Issues: Whether a corporation is exempt from tax under Part I by virtue of paragraph 149(1)(d) of the Act, whether a corporation is exempt from tax under Parts IV, IV.1, VI, and VI.1 of the Act.
Position: Where all of the shares of a corporation are owned by Her Majesty in right of Canada or Her Majesty in right of a province, and subsection 149(1.1) and proposed subsection 149(1.3) do not apply, a corporation is exempt from tax under Part I throughout a taxation year by virtue of paragraph 149(1)(d) of the Act. In addition, no tax will be payable by the corporation under Part I.3 of the Act by virtue of paragraph 181.1(3)(c) of the Act or under Parts IV, IV.1, VI, and VI.1 of the Act by virtue of subsection 227(14) of the Act.
Reasons: 149(1)(d)
XXXXXXXXXX 2009-031387 Sylvie Danis (613) 957-3496 June 30, 2009
Dear XXXXXXXXXX :
Re: XXXXXXXXXX
This is in response to your letter dated March 2, 2009.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we can offer you the following general comments which may be of assistance.
Where all of the shares of a corporation are owned by Her Majesty in right of Canada or Her Majesty in right of a province and subsection 149(1.1) and proposed subsection 149(1.3) of the Income Tax Act (the "Act") do not apply, no tax is payable under Part I of the Act on the taxable income of the corporation by virtue of paragraph 149(1)(d) of the Act.
Paragraph 149(1.3)(b) of the Act, if enacted as proposed, will preclude the application of any of paragraphs 149(1)(d) to (d.6) of the Act to a corporation if it can be shown that any person (or a group including any person) other than a municipality, Her Majesty in right of Canada or a province, or a municipal or public body performing a function of government in Canada, controls the corporation directly or indirectly in any matter whatever, that is, if any such person or group has de facto control of the corporation. Subsection 149(1.1) of the Act provides that for the purpose of determining the 100% and 90% ownership tests in paragraphs 149(1)(d) to 149(1)(d.6) of the Act any right to acquire shares or capital of a corporation should be considered as though the right had been exercised. Where a corporation is exempt from tax under Part I throughout a taxation year by virtue of paragraph 149(1)(d) of the Act no tax will be payable by the corporation under Part I.3 of the Act by virtue of paragraph 181.1(3)(c) of the Act or under Parts IV, IV.1, VI, and VI.1 of the Act by virtue of subsection 227(14) of the Act.
We trust the above comments are of assistance. However, as stated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency in respect of any particular situation.
Yours truly,
F. Lee Workman
Manager
Charitable and Financial Institutions Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch