Principal Issues:
Whether a Provincial Government is considered affiliated with a Provincial Crown Corporation for the purpose of determining if there is a retirement or a loss of an office or employment.
Position:
Provided general comments.
Reasons:
Question of facts.
XXXXXXXXXX 2008-029636 I. Landry, M. Fisc. February 16, 2009
Dear XXXXXXXXXX ,
Subject: Meaning of "Affiliate" for the purpose of the Retiring Allowances
This is in response to your letter of September 29, 2008 in which you requested a technical interpretation regarding the meaning of the word "affiliate" in determining what constitutes a retirement or loss of office or employment. More specifically, you have requested our views on whether a Provincial Government is considered affiliated with a Provincial Crown Corporation for the purpose of applying the guidance in paragraph 8 of Interpretation Bulletin IT-337R4, Retiring Allowances ("IT-337R4").
All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended.
The particular situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. 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. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.
The definition of "affiliate" in paragraph 8 of the Interpretation Bulletin IT-337R4 is intended to be given its broadest meaning and includes a person that is "related" to, or "associated" with the former employer as those words are defined, respectively, in sections 251 and 256. As well, it includes any corporation that is a member of a group not dealing at arm's length.
Related persons are defined in subsection 251(2) and particularly subparagraph 251(2)(b)(i) provides that a corporation is related to the person who controls the corporation. In order to apply subsection 251(2), it is our view that Her Majesty in right of a province of Canada is a person.
Consequently, a corporation can be related to Her Majesty in right of a province of Canada if Her Majesty is the person who controls the corporation. In this context, "control" means de jure control. Therefore, if Her Majesty in right of a province of Canada has more than 50 % of the voting shares of a corporation, that corporation is related.
Where a corporation is incorporated without share capital, this corporation would be considered to be controlled by, and therefore related to Her Majesty in right of a province of Canada, if Her Majesty in right of a province has the ability to appoint the majority of the members of the corporation or the board of directors.
Regarding your question of whether any corporation or organization that is a member of a group not dealing at arm's length is affiliated, it is our view that it is a question of fact that can only be determined after a review of all the circumstances relevant to a particular situation.
We trust that these comments will be of assistance.
Yours truly,
Louise J. Roy, CGA
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch