The Directorate accepted the TSO view that an Icelandic “Sameignarfelag” was as a partnership, stating:
As indicated in Income Tax News No. 38, to determine the status of a foreign entity for Canadian tax purposes, the two-step approach is generally followed:
1. Determine the characteristics of the foreign business association under foreign commercial law;
2. Compare these characteristics with those of recognized categories of business associations under Canadian commercial law in order to classify the foreign business association under one of those categories.
Under Canadian law, the three essential ingredients to the formation of a valid partnership are: a business, carried on in common, and with a view to profit. In this case, you have informed us that you have accepted as fact that FORP qualifies as a partnership for purposes of the Act. In this regard, we note that in Advance Income Tax Ruling #2006-0187681R3, issued in 2007, the Rulings Directorate concluded that the Sameignarfelag discussed in that ruling would qualify as a partnership for purposes of the Act.